Texas Parks and Wildlife CommissionFinance Committee Budget Workshop

July 19, 2006

BE IT REMEMBERED that heretofore on the 19th day of July 2006, there came to be heard matters under the regulatory authority of the Texas Parks and Wildlife Commission, in the Commission Hearing Room of Texas Parks and Wildlife Department Headquarters Complex, Austin, Travis County, Texas, beginning at 9:37 a.m., to wit:

APPEARANCES:

THE TEXAS PARKS AND WILDLIFE COMMISSION

Ned S. Holmes, Committee Chairman

Joseph B.C. Fitzsimons, Chairman

Philip Montgomery

John D. Parker

J. Robert Brown (Absent)

Mark E. Bivins (Absent)

T. Dan Friedkin (Absent)

Peter M. Holt (Absent)

Donato D. Ramos (Absent)

THE TEXAS PARKS AND WILDLIFE DEPARTMENT

Robert L. Cook, Executive Director

Other personnel of the Texas Parks and Wildlife Department

FINANCE COMMITTEE

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BUDGET WORKSHOP

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JULY 19, 2006

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9:37 A.M.

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CHAIRMAN FITZSIMONS: This meeting is called to order. Before proceeding with any business, I believe Mr. Cook has a statement to make.

MR. COOK: Thank you Mr. Chairman. A public notice of this meeting containing all items on the proposed agenda has been filed in the office of the Secretary of State as required by Chapter 551 of the Government Code referred to as the Open Meetings Act. I would like for this fact to be noted in the official record of this meeting.

MS. FIELDS: Thank you. Good morning Commissioners. For the record, I’m Mary Fields, Chief Financial Officer, and I’m here to present an overview of the fiscal year 2007 operating budget. Reggie Pegues, our Budget Director, is at the table with me today to assist with answering any of the detailed questions that you might have as we review the budget together. I call Reggie my secret weapon, so we are ready to roll and answer any questions that you may have.

COMMISSIONER MONTGOMERY: He’s not secret now.

MS. FIELDS: Let’s see, on the agenda today I’m going to recap our process to prepare the operating budget, review the summary of our method of finance for preparing the budget, provide some summaries of the budget, recap our full-time equivalent or FTEs as we call them, review the capital budget, and I’ll wrap it up with just a few key points.

So, for the most part, our process for preparing the operating budget is similar to prior years, so I’m going to touch on just a few key points here. Since this is the second year of the ‘06-‘07 biennium we are basically carrying forward several of the issues that we dealt with in fiscal year 2006. We started with 100 percent of the 2006 base budget and via Rider 27, that’s our Revenue Contingency Rider, and here we anticipate the Comptroller’s Office will certify at least the same amount of revenue that was approved in fiscal year 2006, so we basically built that amount into the base. Just as a reminder, that was $4.9 million of Fund 64 and $3.6 million of Fund 9 for a total of $8.5 million of additional appropriation that we built in above the base.

As in the past years, each division built their budget request and prioritized and justified their programs. We have that process that we go through each year. Also, the divisions were only allowed to request additional appropriation if it came with additional funding and appropriation. Those are things like federal funds and donations. So, we gave them 100 percent of the appropriated. They could add in only those types of funds — and we call those supplementals when we are doing the budget process. This is a change from the prior years. We actually did not budget salary lapse to meet budget demand this year. You recall that salary lapse is generated when we have vacant positions throughout the year; and in the past we estimated those vacancies, and we actually budgeted a portion of that salary lapse, and then as the year progressed we kind of recoup that budget. This year we didn’t do that so we have no lapse in the budget.

Another change from the prior year is we did make the decision this time to go ahead and cap our capital items, so I am going to talk a little bit more about this in detail, but we went ahead and capped it to 125 percent which is the maximum limit that we can apply for capital budget, so we will be covering that in a little more detail.

In financing the budget here, we will start off with just the amount of appropriations we received from the Legislature via the General Appropriations Act. We basically got $197.7 million and we build from that amount, and I’ll be cross walking that in just a minute. The Act also includes limits on the capital budget items and it provides a cap of our FTEs which are at 2,901, which is the same as 2006. There are also numerous other restrictions within the General Appropriations Act. We have 30 specific rider provisions to our Agency. Within your budget binder you will notice there is an Appropriation tab and behind that tab is the Appropriation Act that is specific to our Agency with all of those riders and the limits that I just identified for you. I know y’all have seen that several times, but there is a copy in there for you.

So, lets talk just a little bit about where we’re at with our appropriations and, again, most of these things are carry forwards from the previous year so I am just going to highlight them briefly here. You’ll recall that we got $18.1 million in Prop 8 bond authority for construction and major repairs. Anything we don’t expend this year will be carried forward into ’07. Those UBs, unexpended balances, basically are not incorporated in the numbers you see right now. At the close of the year we will see what we have available and we will carry them into the budget. A good portion of that $18 million will carry forward into ’07. The $2.1 million for the funding for the repair and fire safety for the San Jacinto Monument, most of that is being spent this year; there is a limited amount that will be carried forward into ’07. We have the $15 million of revenue bonds for the East Texas Fish Hatchery. Most of that you will see carried forward into ’07. We are looking, I believe, to have a construction contract in ’07 so that all of those funds, or a majority of them, will be encumbered by the close of fiscal year 2007. We have the $16.1 million in funding for the Battleship Texas. We are still working with TxDOT on those federal funding issues. I believe we applied for the funds with the feds in April and we are still working on that. We’ve already talked about the additional revenue rider; and finally we have the employee pay raise. Now we had the four percent and the Schedule C increases that occurred in ’06 and there is an additional three percent in ’07. That breaks down to I believe $8.5 million with the Schedule C increases in ’06 and another $2.7 million, or something like that, for ’07 for a total of $11 million in increases in salaries over this biennium. I may have that off just a tad, but it is close.

As far as the reductions occurring over the biennium, we did take the five percent reduction, y’all will recall last year, and we cut our operations by $2.6 million and we cut local parks by $5 million. That is still carried forward into this year. We did have — we absorbed about $2.1 million for the longevity, hazardous duty, reclassifications, and salary increases that were not funded by the Legislature.

As you know, our strategies have grown from 10 to 29 and the transferability between those line items was cut in half to 12 ½ percent, so we will still be dealing with that this year of the biennium. I would like to see us in our ’08-’09, our request there, I would like to see us ask for a rider that allows us to take that up to 25 percent because we were one of three agencies that did this exercise of making our budget more transparent. By more detail in our budget and then limiting our transferability, that is an issue that we will want to try to resolve, if we can in our request.

Land acquisition was limited to unexpended balances from 2005 and it was about $1.7 million that we carried forward into ’06; and then anything we don’t spend in ’06 we will move into ’07. In getting those unexpended balances carried forward, we did work pretty closely with the Legislative Budget Board. We had to actually identify the projects that were in progress for acquisition and those are the only projects that we can spend funding on.

Here is the crosswalk that I mentioned. We are starting with $197.7 million that is in the Act; there is the $8.5 million of contingency rider revenue, and the pay increases are in there and it was $8.3 in ’06 and $2.7 in ’07 for the salary increases. The federal funds, we are decreasing that amount a little bit. We are estimating these, you know two years prior, when they are getting into the bill pattern. If we don’t have signed grant agreements then we don’t bring those grants into the budget. So, as we get those agreements signed you’ll see the federal funds increase and I report on those every Commission meeting, so we will catch up on that $2.5 million. Benefit Replacement Pay and benefits, there on the fringe benefits we basically set those funds aside for the Employee’s Retirement System so we are just ear marking those funds. Then we have a slight adjustment to our transfer of the Admiral Nimitz Museum to the Texas Historical Commission. There was just a slight adjustment in that estimate. So that takes our budget to the $249 million that we will be talking about from this point forward.

Now bear in mind that this is a workshop and we will be looking at these things. You will see some numbers change before the August Commission meeting when you actually adopt this budget, so don’t get distressed if you see a few changes here and there, but it shouldn’t be anything material to what we are presenting here today.

Moving on, this is just a view of our method of finance for the budget. If you look on the left hand side there in the red and the blue, those are the funds that we actually earn, and that is 56 percent of our budget. The Fund 9, the Game, Fish, and Water Safety, that is our license and boat revenues which is 42 percent of the funds that we have; state park revenues are close to 14 percent and the remaining funding comes from GR, or General Revenue, at about 22 percent; bonds and other at two percent; and finally, federal funds are right now at 20 percent.

In summarizing the budget, that kind of concludes the financing of it; I have summarized it in three different ways for you today. Starting off with just a broad overview of our budget by the object of expense there, I have included comparable totals to 2006 so that you can get a sense of what we are doing here. Salaries are up as expected between the years due to the three percent increase in pay and you see the corresponding increase to the benefits component. When you consider the salaries and the benefits together, we are spending over 60 percent of our budget on our employees, which I guess is our most valuable contributor, so it would be appropriate that we are spending funds there. Our operating budget is close to 30 percent and you can see there are some increases there and a lot of that has to do with the inflationary costs with utilities, gas, and those sorts of things, so we are covering some additional expenses in our operating. Grants are down slightly there but they are still about five percent of the total budget. Capital expenditures, basically what you are seeing there on the ’07, the $6.5 million, that’s our straight up capital line items that we took to 125 percent. We are going to cover that in a minute. The $43.2 million of capital expenditures that you are seeing there in ’06, again, that includes the hatchery dollars and construction bonds, and quite a bit of that you are going to see carried forward into ’07. Then I wrapped it up there with the debt service amount for the Agency, and in ’07 that is basically our revenue bonds for the hatchery, the debt service there, and then we have some older revenue bonds that we have pretty much expended, but we have debt service that we continue to pay on those. So, that is that highlight.

The next couple of slides are basically showing our budget by the divisions and I am showing the divisional budgets in millions and then just a percent of the total Agency’s budget just to give you a kind of sense of how large each one of those budgets are. Each division has a detailed budget that they manage and I’m not going to cover all of the numbers on these slides. I do have a summary, again, behind the Budget Summaries tab in your binder that just kind of pulls all of these numbers together on one page, but I guess something to note is when you add the administrative divisions together here, which is your Administrative Resources, Executive Office, Human Resources, Information Technology and on the second page your Legal department, those are what I would consider to be your true administration. That is less than 10 percent of the overall budget, so we are pretty tight on our administration. You can see state parks there at 26.5 percent, followed by Law Enforcement, and then our resource divisions. Again, that is on a one pager in your binder.

There are also, before I move on, there is one more summary by strategy that is in your binder. Since there are 29 of them I didn’t attempt to put those on a slide for you, but that is just a reminder. That is how the Legislature views our budget, by those strategies, so it is in your binder if you want to reference those, but I didn’t attempt to put them all on a slide for you.

On our full-time equivalents, I just want to highlight the reductions again that we have taken over the biennium, just to more clearly show the impact on us. We have had a reduction of 137.5 FTEs since 2005 and you can see what those reductions were. We had the five percent operational cuts which resulted in over 59 FTEs, the mandated two percent reductions for most or all the state agencies. Then we transferred our Nimitz employees to the Historical Commission. That took our cap to 2,901 which we are at the same level in ’07. In budgeting our FTEs, y’all will recall that we normally budget above the cap because we don’t have our positions full all year long, so we do budget above them. This year we budgeted about 20 positions more than we did in ’06; still I have the cap amount up there again. We will be watching those FTEs a little bit closer. Our rider does allow us to average FTEs. We do a quarterly average over the year and as long as our average doesn’t exceed the cap then we are in good shape.

Here is a recap of FTEs by division. There is no surprise there that the FTEs kind of correlate somewhat with the budgets that you have seen, so again, just a recap there by division of our FTEs on those couple of slides. And that’s the budgeted total.

Let’s move into the capital budget. This slide just recaps Rider 2 which is in the Act and shows what our limits are at the 100 percent, so you see the unexpended balances. We’ve got $2.4 million there set aside for construction and that is all Fund 9, information technology about $700,000, vehicles at over $1.9 million, and capital equipment is pretty disappointing at less than $100,000. That has all been budgeted with Fund 64 for the State Parks Division. So, our capital budget is at the $5,178,000.

Now we increased it, as I said, by 25 percent so you see that column there with the 25 percent increases of $1.3 million which takes our capital budget to 125 percent for a total of $6.5 million. So, that is what we are operating with this year. The only way we could exceed that would be to request to exceed capital authority, which we have done that for ’06 to the tune of about $1.5 million as y’all recall. We are still waiting to hear if that request will be approved. If it is approved in ’06, which we hope it is, we can UB those funds forward and that capital authority, so hopefully we will see that happen.

Then just wrapping it up with a few key points here and these are all just highlights of what we have already talked about. Those reductions continue to impact us over the biennium. We built on 100 percent of our base plus those rider revenues. I did want to mention just a few additional revenues that have come in under Rider 27, and you recall that I prepared an estimate and that is that $8.5 million that we have been talking about. If we bring in additional revenue above the Comptroller’s estimate that is appropriated to us then we do get to carry that forward into ’07. We did have a one-time, and I believe it was a gas royalty from Cleburne State Park, for $1.1 million and that has been added into the Fund 64.

CHAIRMAN FITZSIMONS: Was that a royalty or a bonus?

MS. FIELDS: I think it was a bonus. Was it a gas bonus?

CHAIRMAN FITZSIMONS: I thought it was a bonus.

MR. COOK: A first-time bonus.

MS. FIELDS: Yes, that is correct. I shouldn’t have put royalty up there. Then I believe we have an additional well that we are going to be putting in at Eagle Mountain Lake.

CHAIRMAN FITZSIMONS: Make a correction to that, it’s a one-time bonus.

MS. FIELDS: It is a one-time. Yes, that is correct.

COMMISSIONER PARKER: And that went into?

MS. FIELDS: Fund 64 for state parks, yes. And then we do have royalty revenue built into the estimate and that has been tracking fairly close to the estimate. We are looking at, I think, an additional well being put in at Eagle Mountain Lake and that will increase those revenues for us.

COMMISSIONER HOLMES: Do we know the timing on that well?

MR. COOK: We don’t. We don’t really.

CHAIRMAN FITZSIMONS: Mary, while we’re on the subject, if my memory is reliable – that is questionable – the last estimate I heard at Eagle Mountain Lake’s monthly royalty was…

MS. FIELDS: Sixty thousand.

CHAIRMAN FITZSIMONS: Sixty. Okay, sixty thousand.

MS. FIELDS: It started out at about, I think, 100.

COMMISSIONER PARKER: One hundred and five.

MR. McCARTY: One hundred and ten was what it started at.

CHAIRMAN FITZSIMONS: Now it is 60?

MR. McCARTY: That is one well.

COMMISSIONER FITZSIMONS: Well I didn’t mean to get off on a rabbit trail here, but there is one well location but there is more – there is pooled interest with wells surrounding the location, correct? So, it’s not the revenue from one well bored, it’s all the minerals. Some of them are being introduced from an off-site. Correct Scott?

MR. BORUFF: I don’t believe that is quite correct.

CHAIRMAN FITZSIMONS: Okay.

MR. BORUFF: There are multiple sites around there, but currently there is only one bore, only one hole.

CHAIRMAN FITZSIMONS: I understand that we have a pool; we have an interest in some of those surroundings.

MR. BORUFF: You are correct.

CHAIRMAN FITZSIMONS: Okay. There is a pool then and the total, not just the one well; the total revenue is $60,000?

MR. BORUFF: Yes sir.

CHAIRMAN FITZSIMONS: Okay.

COMMISSIONER PARKER: And they are supposed to drill three more wells.

COMMISSIONER FITZSIMONS: Is that right?

MR. BORUFF: One to three. I mean, that is still up in the air. We hear they are going to drill one, or two, or three more wells.

CHAIRMAN FITZSIMONS: Okay. I’m sorry to get you off that.

MS. FIELDS: That’s okay.

CHAIRMAN FITZSIMONS: The point is that the income has dropped significantly.

MS. FIELDS: It has, and I actually I was pretty conservative when I built that revenue into the estimate. I put it in at 50 percent of what we figured it would be.

CHAIRMAN FITZSIMONS: Yea, as I remember, there was one month that was over $200,000.

COMMISSIONER HOLMES: Which was probably a couple of months built up.

CHAIRMAN FITZSIMONS: Yea, right.

MS. FIELDS: Then we’ve got, just moving off from that, we did increase some fees in selected state parks back in ’06. Y’all remember that at the beginning of that year, so we anticipate those revenues continuing for us. I will be updating our revenue estimate, obviously for fiscal year 2007, and will be looking for certification from the Comptroller but I do think at this point that we are very safe at least putting in what’s been certified for this year. The Legislative Budget Board actually let us, even though the Comptroller hasn’t certified that revenue yet, they did go ahead and let us build that into our estimate for our base for ’08-’09 in our LAR.

COMMISSIONER HOLMES: Before you go to the next slide, Mary, we increased some fees in some of the parks. How did that influence the attendance in those parks? Do we know?

MR. DABNEY: It has not been a negative influence. Our attendance is holding steady. At the Battleship, for example, it didn’t go down at all, and in fact I think it’s up some. The revenue is certainly holding — from $7 to $10 at the Battleship.

COMMISSIONER HOLMES: Right.

MS. FIELDS: At a lot of the parks though, I think, we only increased by maybe $1. I mean as far as the fee.

MR. DABNEY: Yes at a number of locations. At San Jacinto battle ground we are collecting $1 there and that is going to raise revenue.

MS. FIELDS: Again, just wrapping up here on this last slide with the key points, we didn’t budget salary lapse. You know, when we did prepare the LAR that was really the basis for this budget, gas prices were at least $1 cheaper than what they are now, so we are feeling the pain there. We had utility increases as well. Then again, on the hatchery we will be encumbering those funds by the close of ’07.

That wraps up the presentation. Are there any questions or comments?

MR. PARKER: How much interest are we going to have to pay on those fish hatchery bonds? How much did you budget?

MS. FIELDS: I would have to go back and look at the actual information. I know what we are doing is we are actually not doing full 20 year revenue bonds; we are actually borrowing on commercial paper. I don’t know. Do you have any idea? I can probably get some sort of an estimate for you, but I don’t know that breakout right now.

MR. PARKER: The quicker we get it finished….

MS. FIELDS: Yes, the rider is written kind of with the intent that we try to go ahead and pay it off as quick as we can.

MR. PARKER: Yes.

CHAIRMAN FITZSIMONS: Ned?

COMMISSIONER HOLMES: Yes sir.

CHAIRMAN FITZSIMONS: Back on the division budget slide which includes the operating budget summary for fiscal year 2007, the two page slide –

MS. FIELDS: Yes.

CHAIRMAN FITZSIMONS: You show department-wide at $18 million or 7.2 percent of the total budget, explain that department-wide.

MS. FIELDS: What that category is, it’s basically items that service the entire agency. We have several small Article IX provisions that we have to pay on the prescription drug program and different things like that, so those funds are in department-wide. We also have our claims and settlements that are for Legal, but we have them in the department-wide budget. Right now we have our construction and major repairs budget at $2.4 million sitting there. We are working with Infrastructure right now on how that budget is specifically going to be detailed among the divisions, so it’s in that category. We also have our debt service amounts there; our license system; our contract with Verizon which kind of impacts the entire agency, that’s in there; payments to license agents is also in that category, so those are some of them. I would be happy to provide that in detail if you would like to see that.

CHAIRMAN FITZSIMONS: Okay, you have explained it. In our budgeting there are those that you can’t allocate to any specific endeavor; whether it be Inland Fisheries, Coastal, Parks, Local Parks, whatever that would cross the department.

MS. FIELDS: We will, some of it as I said, we will move out of there and actually allocate, but at this point…

CHAIRMAN FITZSIMONS: It’s a fairly large number at 7 percent.

MS. FIELDS: Yes, it is.

COMMISSIONER HOLMES: I think Commissioner Parker may be a little too simplistic, but it’s going to be close. If you look on page five you can see debt service it went from $5.9 million in FY 06 to $6.5, a $600,000 increase. That would be about four percent on the $15 million in bonds. In the commercial paper market, its going to be pretty close to what it was, what that debt service is on the hatchery bonds.

COMMISSIONER MONTGOMERY: Is it inappropriate to talk about specific items right now, because I have some serious thoughts on this? Whether you want to take it up.

COMMISSIONER HOLMES: Go ahead.

COMMISSIONER MONTGOMERY: With regard to this, our Legislative agenda, I think John’s going to, when we first did this we put a 10 year stamp out there and the bargain with the user groups that we charge a user fee and that covers the budget that Inland Fisheries developed. We had the Legislature go with revenue bonds which are going to soak up interest even at commercial paper rates. We have also been through a period when construction costs have gone up a good 10 to 20 percent, so I think that the net is we have 20 to 25 percent, at least, less real spending power in that fund from the stamp. I wonder now, based on that information and some estimate, if we should go back and say lets extend the stamp for two more years so we get back to the budget that we originally had.

CHAIRMAN FITZSIMONS: Get back to the original budget that we felt…

COMMISSIONER MONTGOMERY: Because we know it’s under funded.

CHAIRMAN FITZSIMONS: That’s a really good point

COMMISSIONER PARKER: That’s a great idea.

COMMISSIONER MONTGOMERY: They did a lot of work on exactly what type of fishery program we ought to have, based on their judgment and experience. We know it’s not funded now. We went out for specific funding, as specific user fee that, for reasons we didn’t agree but we got (inaudible) but we got interest. We have also suffered construction costs.

COMMISSIONER PARKER: After the hatchery, we have other repairs that have interest.

COMMISSIONER MONTGOMERY: Yea, I just hate to see, when we know it’s a problem well in advance, to me it’s the easiest time to ask for that extra two years. I call it two years; it may be some other number. The easiest time to ask for it – we ought to do it now so that we maintain the position, which is the high ground to me, that we are there to fund a specific program.

COMMISSIONER HOLMES: It would bate the question; do we have enough clarity on the kind of repricing of the program that we believe is appropriate today so that we can speak with credibility?

MR. COOK: Yea, that would be the only reason that I would probably pause another biennium would be to, if it continues anything like its been going. Two or three adjustments before now and the end of 10 years. I think we will have a pretty good, solid idea of what the hatchery proposed at Jasper is going to end up, you know full cost, by the end of this coming biennium.

COMMISSIONER HOLMES: I understand that because when you ask for 15 and you go back the very next year and you ask for another three, five or eight, whatever it is, it’s a credibility issue.

MR. COOK: I would like to make that ask one time.

COMMISSIONER HOLMES: Yes. We need to know with clarity and I would guess Phil, Steve, whoever is building this that we are getting close to knowing.

CHAIRMAN FITZSIMONS: Yea, I agree that you don’t want to pick away at this and keep changing your number, but I do think it is important to recognize what Phil was saying earlier.

MR. COOK: Absolutely.

CHAIRMAN FITZSIMONS: Which is that number is not the original number.

COMMISSIONER HOLMES: Yes, and I think it is appropriate to say that.

COMMISSIONER MONTGOMERY: Put a marker down.

CHAIRMAN FITZSIMONS: We want to put a marker down. We don’t know exactly.

CHAIRMAN FITZSIMONS: It will be increasing because of the economy.

COMMISSIONER PARKER: Concrete in east Texas has gone from $68 to $97; basically a 33 1/3 percent increase.

MR. COOK: Mr. Durocher would you like to give us some…

MR. DUROCHER: Let’s just say that we are not going to be able to pay for this hatchery with $15 million.

COMMISSIONER MONTGOMERY: Yea.

MR. DUROCHER: I mean that we know already. We are working with the design team to cut back the scope of the project to get within something reasonable. We have a preliminary bid in with everything we would have liked to have had and it was scary.

COMMISSIONER HOLMES: How scary was it?

MR. DUROCHER: The bid was 50 to 60 percent of what we were looking at.

COMMISSIONER MONTGOMERY: I’m not surprised.

MR. DUROCHER: And it’s construction. I mean there are some things that have happened that we have had no control over.

COMMISSIONER PARKER: I think there comes a time when we have to bow our neck and say, hey, this is reality, this is what we promised to deliver to the freshwater fishing community of Texas, but we cannot control those increases of products that go into the hatchery.

CHAIRMAN FITZSIMONS: We are seeing the same things in parks, infrastructure, all across the board.

MR. DUROCHER: Can I say something else? We have other projects that were in this list of projects and when the first idea of bonding came up we didn’t like it. We wanted to pay cash. As we move on, I think the bonding idea may be a good thing for us. I think the cost of the debt service may be less than the cost of increased inflation, so if we can sell bonds and get more than one project going and finish it quicker, then we can end up saving ourselves money in the long run. So, those are the kind of things that we are looking at.

COMMISSIONER HOLMES: Yea, right now commercial paper is cheaper than inflation and construction costs.

COMMISSIONER MONTGOMERY: You know, Phil’s got a good point. The reason I was bringing this up is it’s a whole lot more than just the Jasper fishery.

MR. DUROCHER: That’s right.

COMMISSIONER MONTGOMERY: That was the big replacement project, but there is a whole bunch of (inaudible) about it that you were trying to correct. Now it makes me wonder if we are going to go the bonding route, let’s do it right. Maybe we ought to extend the stamp long enough to do all of that now so that fisheries get the benefit of it earlier.

COMMISSIONER PARKER: And get the cheaper price.

COMMISSIONER MONTGOMERY: And get the benefit earlier while the rates are still relatively low by historic measures, let’s lock them in.

COMMISSIONER PARKER: That’s a good idea.

COMMISSIONER MONTGOMERY: It would extend the term, but we should put some thought into doing that sooner rather than later.

MR. COOK: I think it would be good to go to the bill sponsors, to the folks that helped us get this done and sit down and have this conversation with them.

COMMISSIONER MONTGOMERY: Right.

MR. COOK: Tell them exactly where we are, see if they, you know what approach they would like to take, if a different twist, in fact we have already done some of that, but I think we should do that and follow their lead.

COMMISSIONER MONTGOMERY: Otherwise we are not going to make that decision ourselves this morning, but to me part of the credibility is letting people know early on and try to deal with it and maintain the same posture you have had all along that you are trying to accomplish the same objective.

COMMISSIONER PARKER: I think it is better to tell them quickly.

COMMISSIONER MONTGOMERY: Than surprise them later.

COMMISSIONER PARKER: Than surprise them later, because they will not remember the concrete took a 33 percent jump two years after we come late with the information that we need to extend those bonds.

COMMISSIONER HOLMES: Absolutely, early warning. But what I was reluctant to do is put a hard number on the early morning (inaudible)

(simultaneous discussion)

COMMISSIONER MONTGOMERY: Back to your point of going sooner for the whole thing.

COMMISSIONER HOLMES: I know this is a little bit off-subject, but you talked about this San Jacinto project and doing the safety work. When is that scheduled to be complete with all that money spent?

MR. BORUFF: August, next month.

COMMISSIONER HOLMES: So we are a month away from running people up the elevator?

MR. BORUFF: That’s correct. Late next month.

COMMISSIONER HOLMES: Let me ask you a couple more questions.

COMMISSIONER PARKER: He’s just like those subcontractors that I deal with everyday.

COMMISSIONER HOLMES: We went from 10 to 29 strategies to provide more clarity. I think that’s a good thing, but going from 25 percent transferability between strategies to 12 ½ obviously is limiting and it gets compounded when the strategies triple. So you end up applying half as much transferability times a much smaller number on each one of these strategies. Do we have any concrete examples of how the limitation of transferability has hurt a given project or strategy?

MS. FIELDS: Do you have any examples Reggie?

MR. PEGUES: For the record, my name is Reggie Pegues, Director of Budget and Planning. One of the new strategies we have is for construction. In the prior structure our construction expenditures were not a separate strategy and now it is a separate line item. For example, if we fund construction out of our wildlife strategy under the previous biennium that would not affect transferability. Under the new structure if Wildlife, Coastal, Law Enforcement — if any of those divisions have construction projects the 12 ½ percent applies against that and also the 25 percent transferability for construction, and that is something that is hurting our ability to increase those allowances.

COMMISSIONER PARKER: How can you solve that?

MR. PEGUES: We have talked to the Legislative Budget Board about a specific rider; if not to increase the transferability from 12 ½ back to 25 percent in this particular instance to at least have a specific rider excluding construction from the 12 ½ transferability provision.

COMMISSIONER HOLMES: I don’t know if it was a big enough expenditure, and I guess I am really directing this more toward Bob and Pete, but when we sent game wardens over to Louisiana, down to the border, wherever it is, has that caused a transferability issue for Law Enforcement?

MR. COOK: No, I don’t think so. You know those costs, we are submitting basically everything associated with those costs, that are eligible, to FEMA and that will be appropriated if we get that money from FEMA. Which that “if” is just about as big as those letters FEMA. But we continue to work on it; it continues to sound like it is going to happen at some level. Those federal funds will come in with their own appropriation. I am absolutely correct there?

MR. PEGUES: Yes sir.

MR. COOK: Yep. So it won’t hurt us there. No sir.

MR. BORUFF: I do think if we could come up with – there have been some specific examples, I am blocking on them right now, where it would have been to our advantage to transfer funds across the strategies to accomplish a project and we could get those to you.

COMMISSIONER HOLMES: I think to be credible, when you go back to Senator Ogden who was the one who was driving the 25 to 12 ½, to be credible in that, you need to have a specific example. If we had not increased the strategies by triple and we haven’t been reduced by half the transferability, we would have been able to do so-and-so and that would have saved tax payers money by blank. Having some real example rather than – obviously it reduces flexibility, but that was the intent of it in the first place. So, we need to show that it actually caused harm.

MS. FIELDS: That is a good point and I think, as Scott is saying, that we can come up with some specific examples and I mean the example that Reggie is raising related to construction is one that has impacted us and I think we can get others as well.

COMMISSIONER HOLMES: I want to make one other point just to make sure that we all understand that we show a $2.5 million decrease in federal funds in that crosswalk slide on page four. It is very likely that those federal funds will come back.

MS. FIELDS: Absolutely.

COMMISSIONER HOLMES: But if they do they come with their own appropriation authority.

MS. FIELDS: That’s correct.

COMMISSIONER HOLMES: So it doesn’t really impact us. We don’t budget it until we actually have a signed grant. We don’t have a signed grant so it reduced it.

MS. FIELDS: Right.

COMMISSIONER HOLMES: But if we do, then it is added back.

MS. FIELDS: Yes, and those numbers again were estimated a couple of years ago, so we are looking now at okay what do we specifically have in our hands and just as you said, we will increase federal funds throughout the year as those signed agreements come in place. It is just easier for us to track knowing that we have the grant in hand before we budget it.

COMMISSIONER HOLMES: And the last point, just for clarification, is that we are budgeting more FTEs than the cap, but that is because we can average between a peak FTE count in the summer and a low FTE count in the winter or other times of the year.

MS. FIELDS: That is correct and I think we have talked a little bit about that. In the summer we run about 130 FTEs higher than we do during the off months.

MR. COOK: On that one I think it is worth while mentioning that, of course we have been dealing with that cap and these seasonal changes within the agency for decades. We have never, ever exceeded the cap. We have never asked for an exception to the cap, which is a process that we could go through and might likely get some help on it if we had to, but we have never exceeded the cap and we don’t intend to now.

COMMISSIONER HOLMES: I didn’t have any other points. Mary, Reggie, John or Phil?

COMMISSIONER MONTGOMERY: I have lost track of where we are on the license contract, and how that affects the budget and whether we need to make any plans for looking at internet options. Will that cause any extraordinary (inaudible)?

COMMISSIONER PARKER: Are you talking about the Verizon deal?

COMMISSIONER MONTGOMERY: I don’t even remember, is it Verizon now and not WorldCom?

MR. COOK: Yes.

COMMISSIONER MONTGOMERY: I am way out of touch on this one, but I have heard you mention it and it triggered me to ask where we are and what our budget choices are with respect to that. How we merge that into the going paperless possibility that is out there.

MR. COOK: Good question and I see George Rios here in the audience, Mary, Reggie, Brenda in the back there. We started work on that basically last fall. You know, we are, our current contract which is extendable goes through August 31, 2008. So we started last fall looking at alternatives. One alternative being us doing an in-house program going paperless, going Internet, to looking at costs associated with developing that program, maintaining that program. We haven’t made a final decision as to what we would recommend to the Commission yet. The numbers, we are pretty solid on our numbers. We have talked to and I don’t know the correct word to – we have bounced the idea out to a number of different bidders.

MS. FIELDS: We did a Request For Information actually and had, I believe, six vendors respond.

MR. COOK: We sat down with other vendors in addition to Verizon, given any opportunity to say okay here is what we need, here is what we expect, what could you guys do, what do you guys think you could do? So we are way into that process, Commissioner Montgomery, and I guess I will ask Mary and or George to comment. We are at a point in time now where we will probably make the decision as to whether or not to go out with an official request.

MS. FIELDS: Request For Offer.

MR. COOK: Request For Offer from outside vendors or whether or not we will take a shot at this thing in-house ourselves. The uncertainty that we all have about the in-house approach is the fact – two instances, we have cut, cut, cut administrative resources divisions, including Information Technology to the point that we just don’t think that we can cut any more. In addition to that we are going through, as are other state agencies — and again if I don’t say it right I will ask George to chime in here, but through the consolidation of those information technology services with the Department of Information Resources where we are actually going to move eight or nine of our FTEs and funding to the Department of Information Resources. So we have started that discussion with that agency, that consolidation effort as to well, okay this is one of the things that we are working on, this is one of the things that we’ve got to deal with at Texas Parks and Wildlife Department, this new contract or a different approach. Do you guys want to get involved; do you want to help us? We got a real quick answer on that one. They didn’t want any part of it. It’s a big project.

COMMISSIONER HOLMES: They have monumental tasks.

MR. COOK: They have a monumental task. In fact, it is interesting because I sit on their – I’m an exofficio on their board and I keep saying to them at every meeting, guys you’re promising a lot. So back to your specific question, the in-house approach does not seem as hopeful to us as we thought as we started last fall. It looks pretty expensive on a piece by piece basis. We are uncertain as to whether we can develop and maintain the system with all of this shaking and vibing that is going on.

Verizon has come back in just the last 60 days, 45 days and said, which is timely from their stand point, that they are interested in extending. We are saying at what price and what tweaks can you make to the system within the framework of contract extension? Because if it is a major shift, if it is something different, then we basically need to go out with an RFO. Yes sir.

COMMISSIONER PARKER: How do other states – have you looked at them? I’m sure you have.

MR. COOK: We have worn ourselves out looking at other states and other ways that people do things, do they do tags, do they not do tags, do they have call in numbers like we have where you can call in and get a number and go bird hunting that afternoon. Oh, yea, the guys have done, Mr. Parker, I think our staff has done a great job.

We sat in, for example, at the International Association, the Southeastern Association of agencies, we sat in on those conferences of automated resources, licensing resources and I’ll just tell you because I have personally set in on some of those, the Texas system is admired by many. As many faults as it has, that we know we have behind the curtain and that we worry about constantly, our system is a pretty good system comparatively speaking. And when you look at cost per piece and the volume that we deal with versus other states – for instance, I have several pretty close acquaintance and long term relationships with leadership in North Carolina where they developed their own system. But there is such a dramatic difference in geography and volume of pieces that we deal with versus what they deal with, but we are still looking. We are about at a point, and again I’ll ask these folks to speak up if I am saying anything that is not – we are at a point where here in the next 30 to 45 days we are probably going to make a decision whether or not we are going to put out a Request for Offer. We are currently talking to Verizon back and forth about well, what’s the cost going to be? Are you going to increase costs? Are you going to make some equipment changes that will benefit us, make us a better system?

One of the things about Verizon, since going back to the old WorldCom days, MCI, is kind of that accountability of where are those dollars. When somebody comes in and starts out then they void a license, they make a mistake, or sell off-line which is less and less. They got the system better and better, but when they sell off-line we have to account for those dollars and you know there are some vendors out there that other states are very happy with and there are vendors out there that other states are kicking out, who call us regularly I might add.

COMMISSIONER PARKER: Do other states use Verizon? Do any?

MR. COOK: I believe there is. No.

MS. FIELDS: I believe Verizon is only in Texas?

MS. DILLE: New York.

MS. FIELDS: New York.

MR. COOK: Yea, I was thinking there were three or four other states that used Verizon.

COMMISSIONER PARKER: So, New York City.

COMMISSIONER HOLMES: Well New York State has a big population.

MR. COOK: Yes, they have a large number of hunters and fisherman. Yea, they do.

COMMISSIONER MONTGOMERY: Second or third largest state. Are there any budget options that we need to think about today from a budgeting standpoint? I have a couple of thoughts about the business part of it, but just on the budget question, does any of this effect the budgeting right now?

MS. FIELDS: In the various options that we have been considering right now, we are hoping that we are not going to increase costs for the license system. So if we can keep the cost relatively close to what we are paying right now for the system, we won’t need to ask for additional funding.

COMMISSIONER MONTGOMERY: What I am fishing for is this, if we had some dollars that we could make available to make the conversion quicker to get more rapidly to a system that is more accessible and easier for the user to get to. I think that at the end of the day, from a business standpoint, we ought to drive to that as quickly as we can. It will cause a big disruption, I realize that. It is a real tricky question, but the Internet is more accessible to consumers. Is there a one-time cost that might help us get there quicker; that we might ask for to make that conversion faster? It is a very methodical…

MR. COOK: George? George Rios will you comment please?

MR. RIOS: No sir, I don’t think there is. I think it is more looking at the technology and how we service our constituents more so than just a one-time cost. I mean, the development of most of these systems are already developed with some of the vendors we are looking at, so really it would just be tweaking that system for our business needs. To go out and have a one-time cost to make, just drop this on the floor and figure out what we need.

COMMISSIONER MONTGOMERY: Okay, there is not a big developmental cost. It is really a choice of systems.

MR. RIOS: Choice of systems and how we have to configure it to meet our business needs.

MR. COOK: When we looked at going in-house, and again I don’t recall the number specifically and there is a little bit of apples and oranges here, but on a per piece basis it was actually going to increase our cost by five, 10, 15, 20 percent so that makes it difficult. There are advantages to having it in-house, we can’t blame anybody but ourselves, but there is also a huge commitment to staffing and having the equipment and the staff to service it.

COMMISSIONER MONTGOMERY: My experience with in-house has not been good with public agencies and I have had one major experience with all the best intentions, all the same thoughts, the need to control and all the other things we are talking about. What we found was this was an agency that controlled its own revenue and didn’t have any of our problems with the Legislature making it doubly difficult. But exactly what you are saying. I think in-house, you really cannot maintain the technology, the training, or the supplemental person that an outside contractor can to stay at state-of-the-art capacity. I think it’s really tricky.

MR. COOK: Well we have such – the only reason we really looked at it close was to see if the cost was there. We have such good people, such talented people, that I knew we could do it. There wasn’t a question in our mind about our ability to do it. But like you say when you look at the cost and you really, which our group did a really good group on that and we are still studying, we are not at a point – where probably I guess I would say, Mary, we’re not going to have time to do it in August but we can come to you in November and give you a really full here’s where we are, here is what’s happening, here’s cost and numbers and we will try to do that.

COMMISSIONER MONTGOMERY: I keep feeling the need from a business standpoint to get to a lot of user access watching the license sale data that is coming across the wire to us.

MR. McCARTY: I would like to make one point that – the point that you are making is going to be real key in our LAR request for the restoration of our 10 percent and probably getting at some of our fund balances. One of our key problems that you are talking about here is a fulfillment issue. When we took significant cuts in Administrative Resources in ’04, and then again in ’05, and then again in ’06, it hurt our ability to fulfill. Fulfillment is a key issue with Internet sales and that is a real key thing that we will be looking at for restoration of our 10 percent cut in terms of getting at some of our Fund 9 fund balances is to be able to manage fulfillment on Internet sales.

COMMISSIONER MONTGOMERY: Can you define how you are using that term, fulfillment. What the meaning of it is?

MR McCARTY: When you buy a license over the Internet you are going to get a confirmation number. You still have to have your license mailed to you because you still have to have your tags and you still have to have those documented pieces as evidence of your license in your hand. Getting that license to an individual is a key piece of the customer service component of those license sales.

MR. COOK: One of the issues that came up recently in a complaint process that we went through when getting back to the person I was trying to make sure I understood what it was we were talking about. It dealt with them having to complete a HIP survey, they can’t just – they have to complete the HIP survey to get a license that will hunt migratory game birds. They have to and that is kind of a hitch here that affects a lot of people. The delivery of that license with tags in the case of anyone hunting a tagged creature has to happen, that actual delivery of that item.

COMMISSIONER HOLMES: Commissioner Parker had a question that I’m not sure that I really know the answer to.

COMMISSIONER PARKER: Do we get confirmation from Verizon that we have received money through them and we actually mail the license out?

MR. COOK: Verizon does that.

COMMISSIONER HOLMES: Verizon mails the license?

MR. COOK: They handle all of the fulfillment. Am I saying it wrong Brenda?

MS. FIELDS: Brenda Dille is our Finance Director and she is actually over the system and can better respond.

MS. DILLE: For the record, my name is Brenda Dille and I am the Finance Director here. Actually we mail out and fulfill the license. Yes you can see in the system that the money has been paid for, and we have it highly automated. At one point Verizon did fulfill this for us, they were then asking a price that was very high in our estimation, and we are able to deliver this at about one-third of the cost they were quoting to us. They were using an outside vendor to do it. We took it over at one-third of the price they were quoting, but it does mean that we are vulnerable to postage increases and those types of things, so we are automated to do it with only about two staff members. Even during the peak season we mail out within two to three days, but postage has been going up.

COMMISSIONER HOLMES: It is extraordinary that you can do it with two people.

COMMISSIONER PARKER: Yea, that blows my mind.

MS. DILLE: It has to do with the automation of it.

MR. COOK: Well some of it is that the percentage of people that are using the Internet is still very low.

COMMISSIONER PARKER: Is it increasing?

MS. DILLE: We haven’t seen much of an increase, no. We would like to see our Internet screens work better, more smoothly for customers. Actually, 10 percent of our complaints are with the Internet screens, so that is an area where we would like to see our vendor improve.

COMMISSIONER HOLMES: Ten percent of the complaints against what percent of the licenses issued?

MS. DILLE: We only sell about one and a half percent of our licenses over the Internet.

COMMISSIONER HOLMES: So you have a 6x problem.

MS. DILLE: It is an area that we have to (inaudible) on how those screens work and the biggest problem is at the beginning of a license season when you are selling two different years’ worth of licenses. They still might want a temporary fishing license and the customer doesn’t seem to know how to select which year.

COMMISSIONER HOLMES: This would be in August or so?

MS. DILLE: Yes, so we have not successfully got a good screen right at the beginning of the year. I get a lot of complaints.

COMMISSIONER MONTGOMERY: Just two quick thoughts to close out my questions. I do appreciate how smoothly this goes with how complicated it is so I hope my questions aren’t taken out of context given the scare we had right when Joseph and I came onto the Commission. I have been sort of waiting on a blow up and it never happens and I give credit to our team for managing a very difficult process. You mentioned bringing up before the Commission in November that the policy question to me is what is state-of-the-art around the country or what could it be that would make it easy for users while still maintaining law enforcement objectives that will help increase sales because we’re still struggling to maintain licensing sales and I think that…

CHAIRMAN FITZSIMONS: You are getting back to the tag less problem.

COMMISSIONER MONTGOMERY: And I realize there are a whole lot of law enforcement questions here, and I am far less encumbered by the facts, and the obligation of understanding this process than you all are.

CHAIRMAN FITZSIMONS: It’s so much easier than…

(simultaneous discussion)

COMMISSIONER MONTGOMERY: We are supposed to make policy. We should be asking the hard questions; and we should push and I think the push needs to be – how do we make this easier to use and get to? Who’s doing the best job in the country and how do we lead the country in synthesizing what is the state-of-the-art to accomplish that objective while still maintaining you know, appropriate law enforcement activities? That’s the question I would like to see addressed that I fumble for every time we have this discussion.

CHAIRMAN FITZSIMONS: Other states have tag less license, correct?

MR. COOK: Some.

MS. DILLE: Some. We have surveyed a great number of prospects and have put together results for Mr. Cook to look at and…

MR. COOK: It is probably less than you might expect.

CHAIRMAN FITZSIMONS: Yea. Back at Ned’s point, what does it take to address this significant concern of the complaints tied to the Internet?

MS. DILLE: We have been talking with Verizon. If we do decide to do an extension with them, that is one of the aspects we want them to work on; is how that screen works and what the choices are that are given to people. What is the automatic default at particular times of the year?

COMMISSIONER PARKER: Is it Verizon’s screen or our screen?

MS. DILLE: It’s actually — Verizon has programmed the guts of it. There is really only like a logo that is put on— sort of from Texas On-line and it’s sold on Texas On-line, so it is really Verizon that is driving this and if we hire another vendor on an RFO then it would be principally their software that will drive it.

COMMISSIONER HOLMES: From the consumers stand point, it’s our screen?

MS. DILLE: Yes, that’s what the consumer thinks.

COMMISSIONER HOLMES: Right.

COMMISSIONER PARKER: And we are the ones creating the problem.

COMMISSIONER HOLMES: The 10 percent of the complaints that come is centered on one and a half percent of the licenses, are they concentrated in just one or two areas or can you dwell on some target?

MS. DILLE: I think the biggest problem is right at the beginning of the year, and the selection of year, and the way that is done on the screen. I think if we could get our vendor to solve that smoothly for the customer it would be a lot easier.

COMMISSIONER MONTGOMERY: I think we have to be real careful at our level not to get down into the weeds on these questions. You look like you – and I’m beyond nincompoop stage with using the Internet, but there are some things that frustrate me unbelievably that ought to be simple, and then you go Southwest Airlines and you got your boarding pass in about two clicks. Look what the airlines have done to make this smoother.

CHAIRMAN FITZSIMONS: And they’re dealing with 911 security somehow.

COMMISSIONER MONTGOMERY: They have very complex law enforcement questions. Again, I think our role is to challenge and push to make this as user friendly as possible, but we are not about to be qualified to deal with the technical issues and they’re going to be difficult to change. But I keep thinking that we’re in the business where revenues and product sales are static. We have got to find ways to make it easy for anyone to get out there and purchase.

CHAIRMAN FITZSIMONS: We have to make it as easy as possible to get a hunting or fishing license. We had the same issue, if you will remember, on the hunter safety.

COMMISSIONER MONTGOMERY: Yea.

CHAIRMAN FITZSIMONS: With youth hunters not going hunting because they didn’t have the tag. We dealt with that I think in a sort of stop-gap way by having the grace period. But the fact is it can’t be a barrier; it has got to be as easy to give us money as possible.

COMMISSIONER MONTGOMERY: That is an appropriate point.

COMMISSIONER HOLMES: We have a couple of really big issues that we need to cover and I will ask if there are any more comments on this section.

Mary, do you have anything else? Reggie?

MS. FIELDS: I believe that concludes it for us. Pass it on.

COMMISSIONER HOLMES: I hate to cut it off, but we do have a State Parks Advisory Committee update and then the LAR. Scott.

MS. FIELDS: Thank you.

COMMISSIONER HOLMES: Thank you very much.

MR. BORUFF: Mr. Chairman, Commissioners, for the record my name is Scott Boruff, Deputy Executive Director of Operations. I’m here today to encumber you with some high level facts about the State Parks Advisory Committee. This is a Committee that Chairman Fitzsimons formed the early part of this calendar year. The Committee has met on three different occasions as a full Committee and on multiple different occasions as subcommittees to address the charges that Chairman Fitzsimons gave the Advisory Board.

I’m here today really to brief you primarily on the fiscal component of those charges. There are three other charges. I will say that at the last meeting Mr. Fitzsimons clarified his charge relative to the fiscal component of the charges that went to the Committee to include really two components. The first is what would it take financially to take care of the system we’ve got and so to speak, get it out of the ditch; I think is the words Mr. Fitzsimons used. But then secondly look forward in kind of a visionary perspective to see what it would take to not only take care of what we’ve got, but to fulfill the 10 year vision of the strategic plan that is laid out in the Land and Water Plan. I will say that the Committee is chaired by former Senator John Montford. It has a lot of folks that are involved in our business, both directly and indirectly, including Mr. Andrew Sansom, our former executive director, George Bristol who was here a moment ago and had to leave. He is the leader of the Texas Conservation Coalition and many others. There’re 18 or 19 folks on this Committee and there has been a lot of work done. Before I move to the numbers which I am sure is your main interest, I would also like to say that I am confident as is the Committee, I will speak for them because I asked their permission to do so, that the numbers that you are going to see are based on credible numbers. There have been comments made during this process that some folks don’t believe in the numbers. The State Parks Division has spent an extraordinary amount of time in the last year coming up with what I do believe, as does the Committee, on very credible numbers. These folks have a combined background in the state park business of several hundred years of experience. I’m talking about the regional directors, the program managers, Mr. Dabney, and Mr. Sholly, at the top of the list.

We do have background information for each of the numbers I am going to provide to you that shows the detail, for example, when you look at the number of FTEs that are going to be represented here, where those FTEs are, which parks they are, what the title of the position is and what those people do. For example, with the equipment list they can show you by park what is needed, how many lawn mowers, how many rakes, how many whatever. So, there is good background here. I’m obviously going to show you a very high level picture.

The last meeting was last Friday, of the State Parks Advisory Board, and they distributed a draft for discussion. I will be glad to get you a copy of it if you are interested. I do have some of the background. I will get those copies to you as soon as this meeting is over, but having said that let me move forward into what we believe will be the recommendations that are coming out of that Advisory Committee. They have not formalized the report. It has not been presented to the Commission as a whole, but I do believe you are going to see something like these numbers.

I have kept this pretty simple for purposes of today’s discussion.

(inaudible)

COMMISSIONER HOLMES: I don’t think it is in here, is it?

CHAIRMAN FITZSIMONS: No, my tab jumps from Budget Summaries to LAR.

MR. McCARTY: It’s not in your book.

MR. BORUFF: I will get you a copy. I will ask you to follow along on the screen. In an attempt to follow Mr. Fitzsimons instructions, I have organized these two simple slides in a priority fashion that we believe, we being both the Agency and the State Parks Advisory Committee, are appropriate priorities for the funding that we would need to: 1) get us out of the ditch; and 2) complete the vision. So the numbers you see in that top tier of yellow text are operational funding needs that will address the current problems we have in taking care of what we have. You will see there that the staff needs in state parks is about $7.1 million. Now let me preface this by saying a lot of the confusion about the credibility of the number has been the fact that when you look from year-to-year and biennium-to-biennium there are changes based on five percent reductions mandated by the Legislature and other things. What we decided to do in order to clarify is all these numbers are relative to the ’06 budget and these are additional funding needs. So when I say $7.1 million is what the Advisory Committee is recommending in additional funding, that is in addition to the ’06 budgeted numbers in State Parks. We can get you those; I didn’t want to confuse you, but for example in ’06 there was approximately $30 million in salaries budgeted in State Parks. What the Committee is going to recommend is that the number should have been, or should be in the future, $37.1 million. There again, I am using rounded numbers. But just for clarity, these numbers are additional funding above and beyond the ’06 approved budget that was approved by this Commission.

Supplies and materials…

COMMISSIONER HOLMES: I think you probably have this and it would be in some type of addendum or back-up, but if you also had that stated in FTEs?

MR. BORUFF: Yes sir, we do.

COMMISSIONER HOLMES: Where are those FTE numbers?

MR. BORUFF: I believe the FTE number is 159.

MR. DABNEY: The FTE number is – Walt Dabney, State Parks Director. The FTE number is 159 of full-time classified positions. That number includes seasonal and classified positions. I happen to have that…

COMMISSIONER HOLMES: I’m sure you do, but I think it is important that it is there.

MR. BORUFF: Yes sir. In fact, once again I think I will rearticulate. I think that you will be presently impressed with that level of detail that’s available. I think it’s all there. Moving forward, after the $7.1 million in additional staff needs and that does include, as Mr. Dabney referred to, both full-time employees and seasonal staff that are necessary to run the parks.

The Advisory Committee is also, I believe, going to recommend about $5.7 million in supplies, materials, and fuels and that’s the things that are needed on a day-to-day basis to take care of the state parks. In addition to that, the Committee, I believe, is going to recommend approximately $4 million in minor repairs. As you may recall, the last few years the minor repair money for state parks has deteriorated to a point where last year they had a $1.5 million budget total to do minor repairs in 114 state parks, so $4.0 million additional for minor repairs. The next line item that you see there which we, for now, are now calling Department Support, $2 million refers to the fact that the last five budget cycles at Parks and Wildlife the Agency has made a concerted effort to minimize the effect on field operations when we took reductions. Not only in parks, but across the board, but in this case we are referring to state parks. So in an effort to not reduce the staffing in state parks and the field, and to continue to provide the services that were necessary, we have looked to the support divisions, primarily Infrastructure, Administrative Resources and Communications, although not exclusively limited to those shops. But those are the three shops that have taken the biggest hits in an effort to shield the State Parks Division from more major impacts.

Mr. Cook is going to reference those, I believe, in his discussion about the LAR later on, but the fact is that we have reduced probably $4 to $5 million worth of staff and operating out of other divisions that support state parks that the State Parks Advisory Board, and the Agency concurred with this, should at least consider restoring part of the funding in order to do what we need to do. So that $2 million is to put those back in to be able to take care of the infrastructure cost, to be able to do the accounting that is necessary, be able to do what the Communication’s Division does. The final number in that top tier which is our highest priority is equipment replacement. This is critical for state parks. You’ve heard the stories about how they have swiped parts from the old machines and there is a lot of downtime involved in that, not very productive — $6.7 million will, I believe, be the recommendation from the Committee to this Commission for additional funding above this year. So those total operating needs that you see represent about $25.5 million that we believe are the very highest first tier.

The next one that we would add actually to the first tier, but is a separate category and is a little bit harder to articulate. I am going to spend a couple of minutes with you folks — is major repairs. As you know, the last ten years we have depended on bonds. We have been expending in excess of $20 million each year and many years up to $24 million and yet our backlog of major repairs is not declining. So, we had a list which ranges in the $400 to $500 million range for necessary repairs to state park facilities around the state. When you pair that with the analysis over the last seven or eight years where we are actually spending $20 to $24 million per year and we are not getting ahead, we continue to have a $400 million backlog. The estimate is that we need about $25 million per year to take care of what we have in state parks.

COMMISSIONER HOLMES: More?

MR. BORUFF: More than what we have today. Now this is where this picture gets a little bit complex and as some of you are probably aware, I think all of you have been here since this happened, not only do we have revenue bonds and prior to that Conally bonds, then the most recent bonds have been the Prop 8 bonds. The issue with our Prop 8 bonds is Proposition 8 bonds were not limited to the State Park Division. Those were bonds that were issued in anticipation of supporting Fund 64 and Fund 9 shops at the Agency. So the $18 million, for example, that was approved in the last Legislative session for us includes bond money for both state parks and for Fund 9 divisions, as well as the fact that there were some line item directives relative to the $18 million — $12 million targeted for the Battleship and so forth, and so on. I can give you that detail if you are interested.

The bottom line is that really only about $6.5 million in ’06 and $6.5 million in ’07 is available for general major repair work in the State Parks Division. Unless more Prop 8 is directed, the funds to the Agency run out after ’07. We have $6.5 million budgeted in ’06 and we have $6.5 million budgeted in ’07. If we get no more Prop 8 money, that’s it. So, the $25 million per year figure is what we think going forward we would want to have each year in order to take care of state parks.

COMMISSIONER HOLMES: Let me go back to that — $25 million more than ’06 or just $25 million?

MR. BORUFF: Just $25 million more. I mean $25 million per year going forward. The issue is that…

CHAIRMAN FITZSIMONS: At this point does that include the $6 that you are getting in the bond?

MR. BORUFF: No sir, it does not. I think what the Committee is going to say – I am trying to represent what they are going to tell you – that their belief is that the State Parks Division needs $25 million per year in today’s dollars going forward into the future for major repairs.

COMMISSIONER HOLMES: You are mixing a little apples and oranges.

MR. BORUFF: They are a little apples and oranges, but when you start trying to portray I don’t want people to get confused. I wanted to articulate this rather than put a bunch of confusing numbers up there. The fact is, if you wanted to look at it that way you could subtract the $6.5 or whatever it is from the $25 this year and you could argue that there is only an $18 million need this year and next year. Given the fact that we are trying to take a 10 year vision, both in our strategic plan and through the planning process with the Advisory Committee, their belief is that $25 million a year is the number in today’s dollars. And we think that is a reasonable number. We probably could spend more or we probably have more need, but we would have trouble spending more.

COMMISSIONER HOLMES: You have $400 million in need that you could presumably spend more if you had the staff.

MR. BORUFF: Yes sir.

COMMISSIONER PARKER: Does that number include all of the state parks that we have right now?

MR. BORUFF: No sir and that is an important perspective. The direction that the Advisory Committee and the staff were given when we started this exercise was to assume that the Texas State Railroad would be a static display beginning January 1, 2007. So this number does not include...

COMMISSIONER PARKER: Since you brought up the Texas State Railroad, who decided that the Texas State Railroad would become a static display? I want to know exactly who decided. Was it John Montford, was it a member of that Committee, a member of our staff? I want to know exactly. Name the person that said that, because I am getting conflicting stories here after attending the Advisory Committee and one member made her remarks that she had talked personally to the Governor and that he was not in favor of closing the Texas State Railroad.

MR. BORUFF: To answer your question, Commissioner, my belief is that – I can tell you my direction came from my boss, Bob Cook, but I do believe that there were discussions held, I know that I was involved in a few of those back when the crisis reared its head. We were trying to determine how we were going to continue with the Railroad. The discussions that went on with leadership downtown, I believe with the Speaker, Lt. Governor and others downtown were involved with the discussions at which time the option was presented or directed to me to use the ’07 budget money in order to continue operating the Railroad through the rest of ’06 and that for purposes of this exercise we should consider the ’07 money being gone that we should convert to a static display. So I don’t know that I have a real clean answer for you sir, but that is probably the best answer I’ve got for you at this point. My direction came from my boss; I believe it was as a result of communications downtown and with other leaders.

COMMISSIONER PARKER: Who was the person?

MR. COOK: The folks involved in that discussion, Commissioner Parker, that are sitting at the table here today were me, Commissioner Holmes, Commissioner Fitzsimons, a representative from the Lt. Governor’s Office and the Speaker’s Office. And what we were faced with at the time was everybody recognized that we did not have in FY 06 and FY 07 enough money to operate for the biennium. There is not enough money to operate the Texas State Railroad through the biennium.

CHAIRMAN FITZSIMONS: In a safe manner. We can’t operate that.

MR. COOK: We won’t be able to pay staff, and fuel and those basic operating expenses. So the decision was made to – we thought at one point in time there was full indication that we were going to be supplemented to the tune of about a half million dollars to finish up ’06, the year that we are currently in, and recognizing that that would also have to be addressed for ’07. So the decision to make a static display was, I don’t know that I can put a single… it was Bob Cook, but if Bob Cook has to stay within budget, which I am expected to do, then I will have to say to you that I made the decision to stay within budget and there was not additional money forthcoming as I said I believed. Mr. Holmes and Mr. Fitzsimons were in the discussion and agreed that we should stay within budget.

CHAIRMAN FITZSIMONS: John?

COMMISSIONER HOLMES: Correct.

CHAIRMAN FITZSIMONS: That is exactly right. We did all we could do to keep the train open as long as possible.

COMMISSIONER PARKER: You answered my question.

MR. COOK: Open and operating.

CHAIRMAN FITZSIMONS: Open and operating as long as possible under present budget constraints, that’s January ’07.

MR. COOK: If we are in a position in December, Commissioner, where I can’t pay the bills, then they may have to float a month one way or another. I’m not sure. But I have got to stay within budget.

COMMISSIONER HOLMES: Well that was part of the discussion with Representative Cook and Senator Staples is that you can’t exactly predict what the breakdowns might be, what the unexpected costs might be between now and year end. It’s possible that it’s going to run through the budget before then. It’s possible that it might go a month or so or longer before you are out of money. Until you are down to the amount of money you have to have to turn it into a static display.

MR. BORUFF: I might add a point that I think might be relative to this particular discussion. I did have the question asked – the Advisory Board asked us the question: What would it take to include the State Railroad both in terms of the short-term fix that would get us through the Legislative session, and in terms of what does it take to get this thing back up and going? The answers are about a million dollars — $900,000 to a million dollars would get us through the Legislative session, until the end of the fiscal year. If we wanted to continue to operate it.

MR. COOK: Let’s be clear about that one Scott. My understanding was that the $900,000 would get us from January 1 until August 31.

MR. BORUFF: If I were given direction to run this Railroad as it is being currently run it would require between $900,000 and $1 million to get us to the end of the fiscal year, August 31st.

COMMISSIONER HOLMES: Assuming no breakdowns.

CHAIRMAN FITZSIMONS: No unexpected costs.

MR. BORUFF: There is a risk that something dramatic like that might happen. It is usually the condition. The second number that we shared with the Advisory Board was the bigger number which is about $40 to $50 million over a 10 to 12 year period in order to put the Railroad in good working condition that is safe and reliable.

COMMISSIONER HOLMES: Over and above operating.

MR. BORUFF: Over and above existing operating costs. Now the trend line does drop a little in the later years. It’s like $4.5 million a year for years one, two, three and $4 million in the next few years and $3 and then $2, but overall $40 to $50 million over a 10 to 12 year period is what we are looking at to really put this Railroad in decent shape. Those numbers were shared, although given the direction not to include them, they are not in the numbers you are seeing, but they are out there. We do have the data and the background to support those numbers, and I think they are credible numbers.

CHAIRMAN FITZSIMONS: On the next item you show, acquisition and development of existing parks, you can’t acquire an existing park so I am a little confused.

MR. BORUFF: This was at the request of Mr. Holmes, actually, and what this is, if you look at the Land and Water Plan over 10 years there are several components, two important ones relative to your question. The first is major acquisitions. As you’ll recall the Plan envisions acquiring four or so large parks in a 4,000 to 5,000 acre range. It also envisions picking up, for example, Big Bend being a good example where in-holdings are…

CHAIRMAN FITZSIMONS: So okay, that’s in-holdings?

COMMISSIONER HOLMES: No it’s…

(simultaneous discussion)

MR. BORUFF: There are parks where we have had opportunities in the recent past to add adjacent parcels that would have greatly increased the value to the public to be able to get on those grounds.

MR. COOK: Great example would be Dinosaur Valley.

COMMISSIONER FITZSIMONS: So that’s contiguous and in-holding.

MR. COOK: That’s correct.

CHAIRMAN FITZSIMONS: And some development. As far as the acquisition component is contiguous and in-holding.

MR. BORUFF: You will see it broken down when I flip to the next slide.

COMMISSIONER MONTGOMERY: I’m glad you put it in there because it’s expansion of our priority parks that have high usage, or great enhancement or in-holdings like they have been recently.

CHAIRMAN FITZSIMONS: Let’s try to distinguish it from – new, free-standing. This is that portion of the Land and Water Conservation Plan which calls for adding to existing parks where we already have the infrastructure and acquiring in-holdings of existing parks.

COMMISSIONER MONTGOMERY: I would say strategic expansion.

CHAIRMAN FITZSIMONS: Sure. Okay, got it.

COMMISSIONER FITZSIMONS: If you have little pieces of boundaries that you can even-up in-holdings and all.

MR. BORUFF: The reason why I presented it this way, Commissioners, depending on who you talk to, you draw the line in different places to “get us out of the ditch.” Our belief is that this is the number that gets us out of the ditch — $50 to $57 million depending if you want to add that acquisition piece.

And then the next slide starts out with – well actually I have it a little backwards there – should start out with the other piece of acquisition and development. I believe what you are going to hear from the State Parks Advisory Board is $15 million for acquisition and development broken down into a $7 million component to do what you just articulated and an $8 million component which is your vision piece, which is how we move forward to complete the 10-year plan.

The road repairs is a really important piece to us, and I guess if I were making the argument I would probably move the road repairs up into a “get us out of the ditch” category myself. There are different people that would probably argue with me. The fact is that we currently have a $5 million per year Memorandum of Understanding with TxDOT in which they provide $5 million worth of roadwork for our state parks. We have a $47 million backlog of road repairs.

CHAIRMAN FITZSIMONS: Say that number again.

MR. BORUFF: Forty-seven million dollars in road repairs that are backlogged. This has not gone down in the last seven years that I have been here, so we believe that $15 million is a reasonable number, on an annual basis, that would allow us over a ten year period to do some catch up work with roads.

COMMISSIONER HOLMES: Scott, is that 15 plus the 5?

MR. BORUFF: Yes sir. This is additional dollars. Now I will say that this is an issue that we want to work closely with TxDOT. We are not wanting to spring the surprises on TxDOT and have a $15 million draw out of their budget; that is not what we are looking for. We are currently discussing with TxDOT and making them aware of – Mr. Cook has been in touch with their executive director, Mr. Behrens. I talked to their deputy executive director yesterday. We are trying to work collaboratively to come up with riders on both sides from TxDOT and Parks and Wildlife that would go to the Legislature and say we want to add $15 million to TxDOT’s budget in order to accommodate this increase, so that’s the plan.

I have already discussed acquisition and development.

CHAIRMAN FITZSIMONS: You are saying you think the Committee’s number will be 15 not 8, is that what you said?

MR. BORUFF: For road repairs?

CHAIRMAN FITZSIMONS: No, acquisition.

MR. BORUFF: Acquisition will be $15 million broken into two components – the $7 million component to do in-holding and adjacent and $8 million to buy new parks.

CHAIRMAN FITZSIMONS: Oh, okay. So you added. I got you now.

COMMISSION HOLMES: This was at my request. I think it’s important to distinguish those.

CHAIRMAN FITZSIMONS: I agree.

MR. BORUFF: And of course finally, and not least of all, the Committee is going, I believe, to recommend $20 million in additional funding over ’06, and as you will recall originally the funding for local parks was $15.5 million. If you recall, there was originally a $32 million cap — $15.5 million is going to local parks, and $15.5 was going to state parks, and the other million went into a capital fund. In the budget cuts over the last several years the piece of that pie that has been hit the hardest has been the local park grant. So they are down from $15.5 million to $5 million per year, so the Committee is going, I think, to recommend increasing that to $25 million per year which will be $20 million additional. So the total, and I didn’t put it down there; I kind of left it. The recommendation that I believe is going to come back to the Chairman of the Commission is going to be just in excess of $100 million.

There has been a lot of discussion at the Advisory Board about what method of funding they would look at to try to accomplish some of these extra funding needs and I will tell you that particularly if you step back to the first slide that there is a pretty strong consensus amongst the Advisory Board that lifting the Sporting Goods Tax cap would be the way to go. As you can recall the Sporting Goods Tax this year, I believe, was estimated at $100 million.

CHAIRMAN FITZSIMONS: One hundred and four million.

MR. BORUFF: The Agency is currently capped at $32 million so I believe the Advisory Board is going to recommend some increase in availability of those funds.

CHAIRMAN FITZSIMONS: But not all of the $32 is appropriated.

COMMISSIONER PARKER: About $18.

MS. FIELDS: A little over $20 million.

COMMISSION HOLMES: I think $20.5.

MR. BORUFF: Twenty million was appropriated out of the $32 this last biennium.

COMMISSIONER HOLMES: If $20 was appropriated and we need an additional $100 and there is $104, you’re getting close but you are still about $15 short.

MR. BORUFF: I think what the Advisory Board is going to recommend is that some component of the additional $100 million be funded through a lift of the Sporting Good Sales Tax, but that some component be addressed through bonding. For example, let me throw out a scenario, you could use – if you lifted the cap and you went to the full $100 million you could use some of that money to pay debt service on a bond that would fund your acquisition, development, local parks, and major repairs. Major repairs in particular. The state has demonstrated a preference in the past decade at least to bond those kinds of things. So rather than to take the $25 million out of the sporting goods money you could simply go out and create a bond program that would be paid for out of the Sporting Goods Tax at a much lower dollar level than what the bond would be. So it is my belief, and I believe the belief of the Advisory Board, that if the cap were to be removed and the full $100 million or so dollars be made available to the agency, we could accomplish everything you see up there on the screen through some combination of direct funding and bonding.

COMMISSIONER HOLMES: I understand that math. The problem with it is not in the first, second, or third year, but it’s the fifth, sixth, tenth, where you have this cumulative debt service that is gradually eroding that.

MR. BORUFF: And that discussion has been – I do believe the Advisory Committee is aware of that issue, and the fact that in particular if you come back in out years and do more bonds that at some point you end up paying for multiple bonds.

COMMISSIONER HOLMES: But this is an annual number. Whatever component in the first year that bonds is a component in the second, third, and fourth? And they are probably, actually growing.

CHAIRMAN FITZSIMONS: I think there is some concern, which thankfully we have had a strong, growing economy the past years – there is some concern that the Sporting Goods Sales Tax may not be $104 or $105 in future years.

COMMISSIONER MONTGOMERY: But it’s a great problem to have.

COMMISSIONER HOLMES: If it’s uncapped and whatever it turns out to be and it grows, then maybe it’s…

CHAIRMAN FITZSIMONS: So, for me philosophically, the reason it makes so much sense is that you’ve got to have a park system that is tied to a growing economy because our mission and the job we have to do gets bigger as the economy gets better and more people move here. So I agree.

COMMISSIONER PARKER: You know, saying what you just said is so graphically displayed here in the graph.

CHAIRMAN FITZSIMONS: In the report of the graph?

COMMISSIONER PARKER: Right.

CHAIRMAN FITZSIMONS: Between what’s …

COMMISSIONER PARKER: On the 21st page where the Sporting Goods Tax is going like this and the state park appropriation is going like this.

CHAIRMAN FITZSIMONS: It’s pulling away and leaving us.

COMMISSIONER PARKER: And then it starts going down and the gap is getting larger.

CHAIRMAN FITZSIMONS: The way I explain that John, is that this is what people are demanding by their expenditures on sporting goods for outdoor recreation.

COMMISSIONER PARKER: Sure.

CHAIRMAN FITZSIMONS: And this is what we are able to get. Those are the two components.

COMMISSIONER PARKER: Because it’s going somewhere else and I think, Scott, I wish everybody had a copy of this thing.

MR. BORUFF: I will get that for you.

COMMISSIONER PARKER: Because on page 19 I think the Chairman’s Charge and the Committee’s adoption of it, actually the dynamite part of the whole study where they start talking about a constitutional amendment to tax code to fully dedicating the Sporting Goods Tax to state parks.

COMMISSIONER HOLMES: Yea, I like the ring of that.

COMMISSIONER PARKER: Then it takes all the haggle out of it.

COMMISSIONER HOLMES: Yea, now that passes.

COMMISSIONER PARKER: Then I think if that came up to the people of Texas it would pass.

COMMISSIONER HOMES: Yea, I do too. Getting it out of the Legislature may be tricky, but I think it would pass.

MR. BORUFF: One of the other charges that the Chairman issued to the Committee was to look at method of finance which is what we are discussing right now. The Committee has gone and with support of staff, a lot of research in other states as to how they do this, and there are some other models that are out there. I believe Florida has a real estate transaction fee that goes to state parks. Arkansas, not too long ago created a new tax where 1/8 of one cent goes to state parks. So there were other models out there that we did look at.

COMMISSIONER PARKER: The Arkansas thing was 1/8 of one penny of which 45 percent goes to state parks, and 45 percent goes to wildlife services, and nine percent goes to the historical department of Arkansas, and one percent goes to administration. That was a remarkable feat, and if you will travel through Arkansas not only their parks but their wildlife services are exploding.

MR. BORUFF: The bottom line is I – my sense is that the Advisory Board is going to lean towards the removal of the Sporting Goods Tax cap as opposed to these other methodologies.

The last one I’ll mention anything about before I answer any questions is the charge to look at whether any of our units might be better operated by other entities. The Committee took a pretty broad swipe at that. They looked both at other state entities and private entities that might be able to do so. I believe the recommendation that will come back will be to continue to do what we have been doing which is to, particularly under 2108 which was the house bill that gave us authority to transfer these to other state agencies or other local entities as long as they are not for profit. We will continue to look at those opportunities. We currently have one at Lake Houston State Park that we are just about to complete with the City of Houston and Montgomery County to turn over operation of that particular park. I also believe they are going to be pretty direct about saying they don’t see any real advantage to the state in transferring our parks and things to other state entities unless there is a real clearly defined fiscal mechanism that would demonstrate savings.

COMMISSIONER PARKER: Moving one expense from us to them.

MR. BORUFF: Yea. So having said that, I will be glad to answer any questions about the State Park Advisory Committee.

COMMISSIONER MONTGOMERY: My question is was it going to be that fundamentally broad – the thinking and the conclusion for the personally supporting for something like that? My question though is have we done, as opposed to our Advisory Committee, hard thinking about how many parks we really ought not to operate? For whatever reason. When you look at attendance and cash flow, you know, I have seen the numbers several times now, and it’s a tough decision to make though, but if we are going to go ask for this kind of funding we ought to basically, on a permanent basis, I think we owe it to our leaders to come back and say we have looked at the financial impact of operating all of these parks, and these are the ones that we think we ought to operate, and these are the ones we think we shouldn’t.

CHAIRMAN FITZSIMONS. The ten year plan of the resource conservation plan does that. It identifies parks that are more appropriately managed by local communities and I think, am I not…

MR. BORUFF: We have put a lot of energy, Commissioner, into doing just what you said looking at this. I know Mr. Dabney has several lists available which I am sure he would share with you that look at that issue from different parameters. For example, our biggest money losers.

COMMISSIONER MONTGOMERY: I’m not saying – it’s not a business and I’m not trying to run it like a business, just in a business type manner.

MR. COOK: There are clearly some parks, I believe, that the State Parks Division would say, “yea, these might be better operated on a local basis.”

COMMISSIONER MONTGOMERY: Right.

MR. BORUFF: What we run into is political opposition when we try to go that direction.

COMMISSIONER HOLMES: There are a lot of different ways to slice and dice it, and one of the things that I asked, I guess it was Walt, what happens if we really do get a 10 percent cut which has been directed so far? How do you then go through the system to determine what gets cut? You can look at the ones that are just absolute – at the dollars that they lose. You can prioritize it in the ones that recover the lowest percentage of expenses by revenues, and then there is another way to look at it on a per visitor basis, what is that loss. Because presumably you are serving the citizens.

COMMISSIONER PARKER: You know you also have another category that has to be thrown in there – what parks. Even though they fall into those categories you just mentioned. For whatever reason, Phil, help me. I can’t think of the Chicago word.

COMMISSIONER MONTGOMERY: The Chicago word is— I think you are looking for the things that are statewide or of national significance which we should operate.

COMMISSIONER PARKER: Like Big Bend State Park, like the Good Night Ranch, Goliad…

COMMISSIONER MONTGOMERY: Like Goliad. We could all differ on that.

MR. COOK: And that is what is in the Land and Water Plan.

COMMISSIONER MONTGOMERY: I understand. My only question – the reason why – I wasn’t trying to come up with the answer now, I just wanted to ask the question: Should we update, and I forgot that we have done that. I’m not that old, but I forgot that. Should we update that and shouldn’t we go with this request having made our best judgment of that tough decision again or reaffirm our decision if we don’t change it? So the legislators know we aren’t saying give us all this money. It seems to me that we ought to go with a package.

MR. BORUFF: We currently have a request from Senator Ogden for a similar set of information. What would we cut?

COMMISSIONER MONTGOMERY: And maybe I’m just out of the loop, and I’m catching up on the thinking, but it seems like it’s a much stronger request if we make our own tough decisions initially, formally, both management and Commission that we are on board.

MR. COOK: I regret that the Chairman is not here, and I won’t speak for him, but at one point in time there was some discussion with the Legislature about creating an equivalent of a base closure list at the direction of the Legislature. That of course didn’t come about. The Chairman, in reference to the recent discussion, declined for us to create such a list. I think, when we get through the process, when we get through the LAR proposal and get through the Legislature, depending on where those numbers are at the time, I think that the Land and Water Plan will carry us through that. I think that the information that is in the Land and Water Plan will carry us to that point, and then on June 1, 2007, we may have some real difficult decisions (inaudible).

There are some of the sites that are clearly, and we have identified them, that are not of state-wide significance. They’re just not. They are important locally. They are very important to the local folks, they’re important to the local economy, but probably should not be operated as a state park. We have offered, as you may recall, we have by letter and in person went to those communities, civic groups, and organizations, and said to them: Are you interested? Some of them we have got into lengthy discussions back and forth in several meetings. When they see the final numbers, when they finally sit down and say, “Oh, you mean it doesn’t make you money?” No, in fact it loses $100,000 a month or $50,000 or whatever the number is. And you can hardly have a site open five to seven days a week without those kinds of numbers coming up pretty quick, even if it’s just a home of some sort. It is very difficult.

COMMISSIONER MONTGOMERY: Should we – I understand the difficulty or the presumption really of coming up with a definitive list, but I don’t want to get caught in the Legislative scramble and really not being empowered to make that decision. Another way to tag that might be to say like the base closure approach or to allow a percentage of the local grants to be made to the (inaudible).

MR. COOK: That is kind of what 2108 originally did. If allowed, I want to say $2.5 million that we could use to go with the park.

COMMISSIONER MONTGOMERY: We should be able to make that part of the request for that purpose, and ear mark it for that purpose, so that we can buy our way out of these problems as we go forward without having to specify now. I understand it is tough to do that.

COMMISSIONER HOLMES: You know we have conflicting positions, and we have a Chairman that doesn’t want to have a park closure list, and we’ve got the Chairman of the Senate Finance Committee that’s asking us what do you do if you absorb this 10 percent cut? How do you absorb it? And I’m not sure that I know what that middle ground is, but one of those things that we can do to comply with Chairman Ogden’s request is to give him the numbers on the parks. This is how much it costs, this is the revenue, and these are the number of visitors. Slice it and dice it the way you like. And then it is not our recommendation, we give him the entire list, every park.

MR. COOK: Walt, come to our rescue here.

MR. DABNEY: I’m Walt Dabney, State Parks Director. It’s a tough issue, and I will tell you that after 30 years at the national parks, they have the same problem. There are units to the National Park System that absolutely had no national significance, and there are two or three of those in Texas that they would love to give to us, and the reality is we don’t want to take them because they are running them. Well, I have personally visited with mayors all over this state that have asked us to come talk about these sites. They know good and well that we probably can’t lock the door and walk off and leave these places. I mean, that just isn’t going to fly, and we can’t force them to take them. They belong to us. So I don’t know first of all how you would do it. Secondly, as Commissioner Holmes was pointing out, we ran these scenarios —which ones lose us the most money, and Senator Ogden in response to his question, I said “Senator, if we start cherry picking around different ones, and one of them is in your district, then you will immediately call foul because we are playing politics.” That is why we don’t – they called it the Washington Monument syndrome in the National Park Service. As soon as they got into budget difficulties, they would say, we are just going to close the Washington Monument. Well the hell you’re not going to do that. That is politics.

So our scenarios are strictly which ones lose the most money. Well, that in addition to the Railroad it does include Washington on the Brazos where we declared our Independence, Goliad where Fannin’s folks were executed, and San Jacinto, and I think LBJ. Lady Bird’s not going to buy that. I mean, so we wouldn’t do that because that is gutting our history, and it just doesn’t make any sense. So then when you go to the ones that recover the least amount of their revenue which would be a good business proposition, out of the top 18 or 19, 13 are state historic sites. So you disproportionately get rid of your historic sites because they are never going to be huge. One of the reasons they are never going to be huge from a revenue standpoint is we are encouraging school groups to come here to learn about their history, and we do everything we can not to discourage them by charging them a lot of money. So, Commissioner Holmes suggested that we look at the cost per visitor, but then again the cost of your visitor will immediately hammer your historic sites or Big Bend Ranch. You could get rid of Big Bend Ranch, that is one-half of the acreage of the state park system, and someday it’s going to be a better destination for people that want a wilderness adventure; otherwise, they will have to go to New Mexico or other places to do it, so that is not a great decision either. So I don’t know the answer. The other thing I will tell you is if I picked, I could pick you five. One of them in our strategic plan is Lake Casa Blanca which I don’t think has state-wide significance to be honest with you. It now makes or exceeds its operating budget with its revenue and the cities down there won’t take it back. It is actually carrying its own weight and it provides an incredible service to a mostly minority community down there that politically Senator Zaffarini isn’t going to buy us abandoning that.

CHAIRMAN FITZSIMONS: Well if it makes us money then we don’t want to.

MR. DABNEY: So we need to update that strategic plan because some of those don’t make sense anymore. If I said okay lets get rid of the top four or five, it would probably be historic homes that may not be significant if you look at the total amount of savings. It’s tiny, not counting infrastructure. It’s tiny. Politically is it worth going through the absolute trauma of taking on the City of Paris, or the City of Marshall, or the City of Seguin and having Edmund Kuempel in the middle? Is it worth it to save a few hundred thousand dollars? I’m not sure it’s much of an answer for us, but we can do whatever.

COMMISSIONER HOLMES: The bottom line is there are no good answers. None.

MR. DABNEY: We can give Senator Ogden all of these scenarios that we have talked to you about.

COMMISSIONER HOLMES: Just give them the information.

MR. DABNEY: Say, you know just tell us which ones. Again, every time you get rid of some of them you are also removing some revenue so that moves that list down further.

MR. BORUFF: Just for the record, in my opinion, Casa Blanca doesn’t make money for the agency. It may meet its operating cost, but if you look at the big picture which includes capital costs over time, it is not making money for the Agency.

MR. DABNEY: But the county won’t take it and the city won’t take it.

MR. COOK: Well it is an interesting process. In this year that we are in right now we had to do some things back last summer. We had to make some cuts, reduce the number of days, and you know some of the simple little steps like delaying the opening of a swimming pool or closing a swimming pool. Depending upon the community, that is a huge issue in those communities. We have had a community or two come forward and say we will help generate the funds to do this and we work with them. We went to work that day, Walt, and his regional directors, and the folks involved, and we were able to accommodate some of those requests and get through the year. But again, kind of like our discussion a while ago, we have got to stay within budget and we will. We will stay within budget unless directed otherwise.

You know one other thing before we get completely away from this, Mr. Chairman that I want to mention is that there are some options and there will be a lot of detail. We will be working on the next presentation that we will talk about here briefly is the Legislative Appropriation Request, but in this process here, there are some options you’ve got to keep in mind because we have some mixing and matching to do. For example, road repair. The provision for TxDOT to provide us right now, that $5 million serves not just state parks, it also serves our fish hatcheries, the wildlife management areas, etc. So that is one of the reasons for whatever that number is, it’s an add on because we need a lot in state parks. We still need work in our parking lots, what roads we have at our district offices that we own and operate— those kinds of things. So the other one that is very similar is our major repair, our Prop 8 program. Percentage wise, yes the majority of it by far is in state parks. The Prop 8, when approved by the voters and by the Legislature also funded repairs at fish hatcheries, wildlife management areas, our district law enforcement offices that we own and operate. So as we do our LAR we are going to have to address some of that detail in that process and in this request, and I just want you to be aware of that. We will be working very closely with Mr. Holmes, Mr. Fitzsimons, and each of you to be sure that as we get that done that everybody kind of understands it. It gets complex at times.

COMMISSIONER HOLMES: Just one other piece and then we will go to the LAR. On the road repairs, do we have some kind of basic information about how many miles of roads do we have? What does this mean in the context of TxDOT’s normal road repair budget for “X” number of miles of roads? How does that relate to what we spend? I’m hopeful that it would justify the additional $15 million.

MR. DABNEY: Another point in this whole funding scenario that may be relevant in this, if you figure that the road system in the state parks, fish hatcheries, and the wildlife management areas are in fact state roads, they aren’t just park roads. They are state highways in essence. It doesn’t necessarily follow that they should necessarily be paid for by the Sporting Good Sales Tax. It could be out of the Motor Fuel Tax or whatever. If that were to happen in this total Sporting Goods Tax scenario, and you figure you’re only getting $20 of the $104 now in appropriations, and you pull that $15 off and pay for it out of that, then you have $10 left between the $20 ½ and the $32 million, now you’re within the available in that total package. You’re within the available amount of the total Sporting Goods Sales Tax, so it does not exceed that. If you then indexed it presumably to an expanding economy selling more sporting goods and that kind of thing, it could follow suit that you’ve got a long-term viable funding source.

COMMISSIONER PARKER: That’s an excellent point.

COMMISSIONER HOLMES: Yea. If you put the existing $5 million and the $15 million and that was the Motor Fuels Tax allocation, as opposed to sporting goods, then it closes that $20 million gap.

MR. DABNEY: One other point on that is say Meridian State Park is a state – it’s a road. It is so much more expensive to gear up a road project — to just go do Meridian, than if the State had it in their planning that when they are doing the highway, and it goes past Meridian, then they just run in there and do it — the overlay, or chip seal, or whatever. It is a fraction of the cost of the way we are doing this.

CHAIRMAN FITZSIMONS: That is the whole idea of having a 10-year plan, but if you don’t have the funding structure for the 10-year plan, then it doesn’t happen.

MR. COOK: Well, we have those projects, and we work with TxDOT. I mean it is a full-time job working with TxDOT to lay those projects out and say okay here is when we can schedule, sometimes it works and sometimes it doesn’t.

COMMISSIONER HOLMES: Okay, let’s talk about LAR.

MR. COOK: Okay. I am going to ask, Mary, if you will come up to the mike. I know there will be some details here, and you can help me operate the little handy, dandy machine there. Bottom line, our Legislative Appropriations Request, of course it is a very, very important document as we go into the Legislative session. That will be our “ask” for the FY 08–09 budget. Just a very, very brief review about our ’06 and ’07 budgets there that you heard Mary talk about today. You know, starting with a base for ’08-’09 of $335.8 million. You take that 10 percent cut right off the top which is about $14.3 million and we are looking at starting that ask, starting that process, with about $307.3 million.

COMMISSIONER HOLMES: For both years?

MR. COOK: For the biennium. Yes sir.

COMMISSIONER HOLMES: And that $100 million a year extra is per year?

MR. COOK: Yes, yes. We haven’t – now that gets into the exceptional item request.

COMMISSIONER HOLMES: Right.

MS. FIELDS: And you will note that these numbers are lower than what I just presented for the ’07 budget. That’s because these numbers represent General Revenue and General Revenue Dedicated only. It doesn’t have our federal funds and those sorts of things in there.

MR. COOK: You don’t deduct from federal funds. The direction was very specific to GR and GR Dedicated. So to look at that $14.3 million just in overall, in those basic funds, you look at Fund 9, GR Dedicated, that is $7.9 million reduction, in Fund 64 Dedicated $2.5 million, other GR Dedicated which is what 467?

MS. FIELDS: Local Parks.

MR. COOK: Local parks administration about $100 K, in General Revenue about $3.8 million. Those are the allocations of those GR Dedicated and GR funds that a 10 percent cut would have to come from. If you look at that – where we are right now in beginning to breakout, how would we do that across the board? Let’s just take Fund 9 dedicated, that $7.9 million in Fund 9, and we have gone over some of this before and I’m not going to spend a tremendous amount of time on it, but you know you are looking at reductions there across the divisions. Some of the impacts, of course, will primarily be out of FTEs; I’ll just have to tell you when you look at that $5.2 million up there that is FTEs. We can’t cut operating more. Our operating is increasing. Our cost of fuel, our cost of steel, cost for repairs, as we have talked earlier, so primarily that is going to come out of FTEs, I think. Other areas where I think we have the opportunity to make some reasonable reductions, in our opinion, are in the Shrimp Buyback Program for example. We currently allocate about $2 million to the Shrimp Buyback Program. With the results that we are seeing in shrimping, the effort in shrimping has been dramatically reduced for a whole combination of reasons, but we believe if we had to take a 10 percent cut in Fund 9 that it would be reasonable to reduce Shrimp Buyback by 50 percent. It also reduces our capital construction allotment by 50 percent. You see some other minor reductions there. In Fund 64 that $2.5 million – let me put a little background here. You know if you go back and look at FY 04, ‘05 and ‘06, the last three or so budget cycles that we have been through, the bottom line here – my bottom message here is we are at a point where we cannot afford, in my opinion, to recommend to you that we may continue to make dramatic cuts out of our administrative divisions, out of our support divisions. When I started this job in ’02 we had just received a very, very hard criticism about our reconciliation process, that we weren’t doing the job that we were expected to do by the oversight agencies. So we staffed up Mary’s shop, increased the number of people, allocated resources from Funds 64 and Fund 9 to get our staff up to the point that we felt that we could do that job. And just to give you an idea in Administrative Resources since FY 04 we have reduced the Administrative Resources Division by 24 FTEs already. We have taken the extraordinary cuts, the major cuts as Boruff said out of Austin to keep that impact out of the field as much as we could. We reduced Administration Resources Division by 24 FTEs — 12 FTEs in ’04, four FTEs in ’05 and eight FTEs in ’06. We are just at a point where we got into that discussion a while ago about the new license system and what it’s going to take to deal with those issues, I just don’t think we can do those kinds of reductions. Now we will take some reduction out of the 10 percent cut, not the extraordinary. Another example, while in ’06 we cut 74 FTEs in state parks, reduced services in 52 parks, closed several pools as I mentioned a while ago, we closed a couple of units where we had two units on a lake, we closed one of those units or made the other one only partially open. So we have done some of those things in parks to the extent that we could. Also in the Communications Division in ’04, Lydia’s division, we have cut 20 FTEs since ’04 – 19 in ’04 and one in ’06. The Infrastructure Division has probably taken the largest cuts overall. Since FY 04 we have cut 49 FTEs out of the Infrastructure Division. That is about 30 percent of the total in that division and many of those have been architects, engineers, folks at that level so that our ability to provide a major bonding program now to staff and do the job is very close, very difficult. So, in dealing with this kind of cut in Fund 9 for example, one of the things I said the other day was we probably would not have a game warden cadet class if we get this kind of cut. What that also means to me and the resource divisions here is we will probably do a hiring freeze in Fund 9. I’m not just going to freeze the Law Enforcement Division which in effect, if you don’t have a cadet class that is what you are doing. So we would fill only the absolutely essential positions in any of those divisions over the biennium if we have that kind of cut.

You can see the other major item cut there is the local parks at $3.8 million. That leaves, I believe, $1.6 million in the Local Park Grant Program which is basically enough to administer the projects that we’ve got issued and out there on-going now. For all practical purposes we will not be issuing any new local park grants at all. This again, and I want to stress this and I did so the other day and unfortunately that was overlooked, this is one of the options – these are kind of what we are looking at. Whether or not we end up going there at all, we are a long way down the road from there. As far as the list of parks, if something like this happened, if we sustained those kinds of cuts in state parks, there would be some dramatic reduction in services. Yes, there probably would be some closures. I wouldn’t even attempt to create that list until we get through the process, but it could be significant. Okay?

The area that I hope that you gentlemen and the other Commissioners will assist us with as we go through here falls in this group here. This is the exceptional item request. In other words you’ve got that basic ask, that number that we were looking at a while ago about $300 million for the biennium. This is like, okay, what do you need in the exceptional item request? We put this in a priority order. We submit this to them in a priority order.

Our first request would be to restore that 10 percent. Bring that 10 percent back across the board in Fund 9, GR, GR Dedicated and Fund 64.

Item number two there is a big one and depending on some of these details that we talked about this morning of how we are going to ask for – for example, I want to touch on another area there in this ask, number 2, this additional funding for state parks. I mean we are talking right here today somewhere in the range of $25 million, $50 million to get out of the ditch, to $100 million. One of the possibilities that would appear to me to be available is we asked the other day, we got to talking about if we were asked how would we fund this, which we will be at some point in time, there is a quarter of a billion dollars of Prop 8 bond money that hasn’t been used. We have only got a tag on about $46 million of that, but there is another couple of hundred million, $250 million that were originally approved for other purposes that either haven’t been used or have been turned back. It would appear to us that for this session of the Legislature, and I think you always got to keep in mind that this Legislature is going to approve a two-year budget, they are not going to guarantee you anything for any time past that. So to keep our ask in the real of what’s doable and what’s the easiest way to do it. We might have a very good case in the state park request to say you got Prop 8 go ahead and allocate another $20 to $30 million in addition to allocating us $25 to $30 million a year out of that. So, it’s a doable, again, a very easy thing to do.

Another request, going right on down the list, Proposition 8, General Obligation Bonds.General Revenue for a game warden class. I have asked for this. This will be the third or fourth biennium that we have had it in our request. It has been extraordinarily demonstrated the value of our game wardens to duties other than just fish and wildlife by their actions involved with hurricanes; their actions involved with homeland security. Time and time again, they’re the guys that get called on first. They lead those efforts, and you know we are set up right now. It looks very good that the governor has indicated to us, has indicated to the agencies involved, that he’s going to make some funding available to us on this homeland security work that we are doing in the Del Rio, El Paso area, and we are going to get some help there. That looks very good, and that will be, of course, that will be homeland security money. But what we are talking about here is just day-to-day operation; responsibility that they have to enforce the laws of the State of Texas. Asking for some funding there.

Appropriation of our freshwater fisheries stamp revenues; however we end up going there, we will have that discussion with leadership downtown but bottom line it looks like we need to get those projects done as quickly as we can. We need to get those projects on the books, allocated, contracted, and go.

The allocation of Fund 9 and 64 available balances is one that continues to come up and people have all sorts of ideas about what it is and what the numbers are. As recently as last week we looked at the numbers, for example, in Fund 9. Now this is money that hunters and fisherman have paid for their hunting and fishing licenses. That is primarily the source of those funds. Mary, correct me if I’m wrong, we anticipate that the next report will be about $49 to $50 million. Somewhere in that range.

MS. FIELDS: That’s correct.

CHAIRMAN FITZSIMONS: Fund 9 and 50?

MR. COOK: Fund 9.

MS. FIELDS: Fund 9.

COMMISSIONER HOLMES: Is it current Fund 9 or is projected through the ’09 biennium?

MS. FIELDS: It is projected through the end of this fiscal year. The latest report we ran.

COMMISSIONER HOLMES: Of this fiscal year, FY 07?

MS. FIELDS: Yes sir – FY 06.

MR. COOK: FY 06.

COMMISSIONER HOLMES: FY 06. Okay.

COMMISSIONER MONTGOMERY: At this point there is not cash sitting there, there is projected revenue that’s unappropriated.

COMMISSIONER HOLMES: I’m just trying – that timeframe that we are projecting that that cash has…

MR. COOK: End of FY 07, August 31.

COMMISSIONER HOLMES: FY 07?

MS. FIELDS: FY 06. Just to clarify, Commissioner Holmes, the cash amount is actually higher then what we are projecting the balance to be at the end of ’06. The projection at the end of ’06, as of the end of May was $49 million. I think our current cash balance is somewhere in the $60 million range.

COMMISSIONER HOLMES: But we will use some.

MS. FIELDS: Yes, we will use some of it.

COMMISSIONER HOLMES: So at the end of FY 06 which is August 31st, we have 45 days, we think it’s going to be roughly $50 million.

MS. FIELDS: Yes.

COMMISSIONER HOMES: Okay.

MR. COOK: Some of the ask there, the request there is for – and we haven’t settled on a number, but I suspect it’s somewhere – in order to keep up with increased costs; in order to expand some of our key programs, technical guidance, game wardens, fisheries, all this work we are doing on water and those issues; I think a very reasonable ask there in Fund 9 would be for an additional $7 to $8 million of that to be allocated per year. That way we would burn that balance down in about six or so years.

COMMISSIONER MONTGOMERY: Is that going to be constantly replenishing or does it accumulate over a long period of time? Do we generate…

MR. COOK: The number has been growing over the last several years.

MS. FIELDS: There was one year where it did actually dip down and that was – I think that was in 2003 when we were asked to spend down our balances. We were directed to. So it has been growing on a trend of about $7 to $8 million per year.

COMMISSIONER PARKER: Who’s using that money right now?

MS. FIELDS: It’s sitting in the Treasury.

CHAIRMAN FITZSIMONS: The Fund 9 balance can’t be used for anything else, but it is there to help balance…

MR. COOK: I believe it is used to balance the state budget. It is not spent, but it is used to balance the budget.

COMMISSIONER HOLMES: Okay, what about 64? How much is in 64?

MS. FIELDS: Fund 64 right now is somewhat of a moving target. So, I really do not want to quote the exact amount of Fund 64. We are going to be working feverishly over the next…

COMMISSIONER MONTGOMERY: Is it in the ballpark of $1 million, $10 million, $100 million, what is it?

MS. FIELDS: I would say somewhere between $5 to $8 million.

MR. COOK: Yea.

COMMISSIONER HOLMES: We don’t necessarily come to the same number as the Comptroller’s Office.

MS. FIELDS: We will be working…

COMMISSIONER HOLMES: But I think we still have to have our own number.

MS. FIELDS: Yes we do.

COMMISSIONER HOLMES: And maybe it’s different and maybe it’s not.

MR. COOK: They’ll end up being very close to it.

COMMISSIONER HOLMES: Well, if they’ll tell you what it is. What their number is.

MR. COOK: But we will be able to defend our numbers very well. Okay, just in closing, you know in the LAR there will be an administrator’s statement up front that outlines programs that will be restored, summarizes exceptional items, any major initiatives like this impact of the Department of Information Resources on our data center consolidation, and we will speak to this business about our interagency contract and work with TxDOT, so we will cover a lot of the explanation and detail in that section of the LAR.

Now, my request to you and you know, given this information, we will be continuing to provide you a stream of information on this and get your feedback and your guidance on it. Our report is due August 16th.

MS. FIELDS: August 18th.

MR. COOK: August 18th. For all practical purposes we will need to finish it very early in August and send it to the printer.

MS. FIELDS: Yes. We will need at least a week of lead time. We have to enter all of this. We have it in our financial documents, but we have to enter it into the LBB’s system, ABEST and then it prints from there.

MR. COOK: In case you don’t remember, the detail in a LAR, I believe is 400 and something pages?

MS. FIELDS: I think I did a count and it was 430 something pages last time.

MR. COOK: So it ends up being a document that is, you know, that thick that we’ve got a lot of work to do between now and the end of the month. We are well on our way and we are basically headed this direction that I have laid out to you. And how we stage this thing, obviously, you just kind of want to get that primary message delivered in your LAR and all the detail and divide this that way and cut this one four times that way will happen as the legislative process – as we get into that legislative process with the appropriations committees and the leadership downtown. But we want to get our main message out there so we want to be sure that what we end up putting in that document, you know, we feel like our numbers for instance on the state park ask – that our numbers should be very close to the Advisory Committee’s recommendation. We have been working very closely with Chairman Hilderbran and his numbers and do we fit in those numbers — make sure we stay within that realm and that is kind of where we are in this process.

COMMISSIONER HOLMES: Phil?

COMMISSIONER MONTGOMERY: One thing occurred to me while listening to you. I may be off but I think there were more FTEs when Joseph and I came onto the Commission five years ago than there are today. I am confident that some of the budget, maybe the total budget, is higher than it is today, and I know the percentage allocation headquarters verses field is higher, and it should be. I do think we have a lot of credibility, but I think putting in perspective for all legislatures, whether they have followed us for a long time, or not, really helps make the case why we are where we are, and why we need what we need, and why we have been good soldiers, and you know, frugal service-oriented stewards for a number of years now really sets the case well for the ask here, and I think it is worth putting that in writing in summary fashion because it is a powerful statement.

CHAIRMAN FITZSIMONS: I think you made a good point is that the Department has done a very good job of managing these resources and doing our mission in an efficient way, but as John heard me say to the Advisory Committee, there is an apparent problem when you have one set of funding for fish and wildlife that is tied to growth, and another mission in parks that’s capped as growth passes you on. And that graph that John showed us is as good as an example of what’s happened as any.

COMMISSIONER MONTGOMERY: I understand.

CHAIRMAN FITZSIMONS: Yea, and so to me that really is – it really is that simple. You can’t have the supply of services capped and the demand increasing. You have got to have the same thing.

COMMISSIONER MONTGOMERY: I think documenting the preamble that Bob gave makes it very hard.

MR. COOK: We agree. You know, I didn’t mention for example, one of the best examples that we can hold up and that the Legislature can look at, our HR division, Human Resources Division, Al Bingham’s division, we’ve got 27 employees, 27 FTEs?

MR. LOPP: We have 27 1/2, yes sir.

MR. COOK: And you put that into a ratio to total employees of the agency and that’s like 80 per employee whereas most agencies are running 30 to 40, Jim?

MR. LOPP: Well sir, with over 3,000 FTEs roughly at 27.5 we are at over 100. The Legislature has looked at two different targets. One to 100, so we are well over 100 depending on how you look at it, and then one to 85. So we are at about one to 107 FTEs. We are conscientiously trying to keep it that way. (Inaudible)

MR. COOK: We have got examples like that, that are hard examples, comparable examples that I think make the point.

COMMISSIONER MONTGOMERY: We will have to memorize the number of FTEs in order to appear before Senator Barrientos – 3,024 if I remember right.

(Simultaneous discussion)

COMMISSIONER HOLMES: I think your point is how the presentation is made is very important, but I think we also need to talk just a little bit more about what we as Commissioners feel is the appropriate number for that number two category which is state parks. I’ll give you a general sense that I shared with Mary, Gene and Scott the other day and that is that we had a very well qualified, and expert, and thoughtful State Parks Advisory Committee. There are numbers that are well documented and thoughtfully prepared and to divert from those numbers in our presentation seems difficult.

CHAIRMAN FITZSIMONS: Ned, I would not only agree with you, I would just say it a little bit blunter. I appointed them for a reason.

COMMISSIONER HOLMES: Yea.

CHAIRMAN FITZSIMONS: And I was careful in the people I chose.

COMMISSIONER HOLMES: If we fundamentally disagree with their conclusion, that’s one thing, but we don’t.

CHAIRMAN FITZSIMONS: We need to be working with the same numbers. Our conclusions the same; the charge is clear. What do we need to do to have the best state park system in America? And we shouldn’t, I know — and all of the things that Scott and Walt have to deal with everyday, we shouldn’t be too focused on the trees here and the things that are broken today because there will always be things broken at a state park on any given day. What we need to be focused on is the best system in America and how we get there. And I applaud Walt for the work he has done to bring attention to the current situation. I think we have a lot of people’s attention now and I would like to focus on a big picture of how we execute our 10-year plan because as far as the fish and wildlife side we do a pretty good job. We are moving right along, but we are behind on the park side and we need to do in seven years what is set for 10, but we can do it.

MR. COOK: We will stick close to those numbers. We will be right on them.

MS. FIELDS: I wanted to go back actually to the overall presentation and the base numbers that were shared and some of those estimates of the annual reductions. There could be a few slight changes in those numbers as well before you see the final document. We are still working with the Legislative Budget Board on finalizing our base reconciliation so there could be some number changes. Nothing materially different that what was presented today but I don’t want you to – if you see all the sudden that the annual number is $14 million instead of $14.3 or something like that, I wanted you to understand why the change.

COMMISSIONER HOLMES: Well this is a budget workshop.

MS. FIELDS: Yes it is.

CHAIRMAN FITZSIMONS: Right, it is still a work in progress.

MS. FIELDS: Yes it is.

COMMISSIONER PARKER: May I ask one question?

CHAIRMAN FITZSIMONS: Good point.

COMMISSIONER PARKER: Are we going to take advantage of the next to last sentence of that directive from the LBB and the Governor’s Office of Budget and Planning? Wherein we could have specific areas that we just don’t feel like we can cut 10 percent. That is the next to the last sentence of that document. Do you want me to show it to you?

MS. FIELDS: I attend meetings for some of the larger state agencies and the Governor’s Office, who actually assisted with the directive that’s in the letter, they have said that they wanted us to go ahead and show the 10 percent reduction so that they could determine the impact to the various agencies —that we would show that as impact. It doesn’t necessarily mean that we would take that full 10 percent reduction. They did exclude a few things such as debt service and some of those things and we have included that within our calculations. So…

COMMISSIONER PARKER: You know what sentence I am talking about is?

MS. FIELDS: I believe there was one sentence in there that said that we could ask for an exemption of some programs.

COMMISSIONER PARKER: Absolutely.

MS. FIELDS: And we have elected not to ask for an exemption. I think we are exempting the things that were specifically identified in the letter. Part of that is based on the directive that we’ve gotten from the Governor’s staff in various meetings. That they would like us to go ahead and show the impact and they will go from there.

CHAIRMAN FITZSIMONS: It’s an exercise.

MS. FIELDS: Yes.

CHAIRMAN FITZSIMONS: To show what the impact would be, and I think the problem with going with the exemption, John, if I’m not mistaken, is it leaves the impression that but for that everything would be okay, and that wouldn’t be the right impression to leave because we need a lot more than that. You follow me?

COMMISSIONER HOLMES: The other piece of it is there is always time to come back and massage the…

CHAIRMAN FITZSIMONS: It’s an exercise of showing the impact.

COMMISSIONER MONTGOMERY: It also plays to the fear that the Legislature has that some game will get played, which again, the year that I came on was a big fear, and we don’t want to go back there.

MR. McCARTY: Early on in the process there was some indication that law enforcement, homeland security, those types of efforts would be given exemptions, so we did call the LBB and ask them for an exemption for law enforcement, and they said no.

MR. COOK: Yea.

CHAIRMAN FITZSIMONS: I think they want this exercise to show the full impact, and we will be glad to show them the full impact.